If the bitcoin is imposed as a means of payment, its price will skyrocket to $ 257,000

The strong irruption of bitcoin in the markets has alerted the big central banks of the world. The 'lords of money' warn about the dangers of this digital asset to investors, a message of caution that can also hide the fear of these monetary institutes that bitcoin can replace legal tender money and reduce the power of banks central. Without this happening, since the offer of the bitcoin has a ceiling, its price would have to shoot up.

However, for now there are few who believe that bitcoin is able to snatch the euro or the dollar its throne in the Eurozone or the US, but the debate is already open. From Commerzbank highlight that "it is very unlikely that bitcoin gain ground between consumers and companies as a means of payment." Some experts do believe that bitcoin can become a kind of guide for other traditional or digital currencies, that is, a type of gold standard, but with bitcoin.

"This scenario is unlikely due to the network's economic effects and the hostile stance of governments and central banks, at least in the developed countries it will be difficult to get the demand for bitcoin stable, and it will undoubtedly continue to be a roller coaster." highlights the German bank in a comment on this cryptocurrency.

The price of bitcoin would skyrocket

From this bank calculate that with the limited supply of 21 million bitcoin (that amount is the maximum that can be 'mined'), the price of this currency would have to amount to 257,000 dollars or 218,000 euros if all agents of Germany, Canada , USA, France, Italy, Japan and the United Kingdom (the G7 countries) used it for their transactions. The bitcoin moves in the present day above the $ 16,500 per unit.

This calculation has been made by adding the amount of money issued by the central banks of these countries, divided among the 21 million available bitcoins, assuming that some day they would all be mined.

Central bank money is the Bundesbank's technical term used to refer to money that can only be created by a central bank. The money of the central bank includes the currencies and the notes that the central bank puts in circulation, as well as the deposits in sight maintained by third parties in the central bank (reserves). Demand deposits held by commercial banks with the central bank are particularly important in this context. Although there is frequent talk that central banks provide liquidity or reduce liquidity to commercial banks, in reality this refers to the provision or reduction of central bank money, highlights the Bundesbank or central bank of Germany.

Once this technical aspect is clarified, it is very unlikely that bitcoin will be imposed on legal tender money. "People in developed countries would not change to private money even if inflation rose to 5 or 10%."

The effect net or netword effect prevents the expansion of bitcoin as a means of payment: "If everyone in the official currency (for example euros), the first who tries to pay with a new option will find little acceptance when paying."

The network effect

"This network effect is the biggest disincentive for people to switch to private money even if inflation rises, which shows why, in the 70s, with inflation at very high levels, people did not start paying with gold coins. Other types of payments with private money: Only in the face of galloping inflation, such as housing in Germany in the 1920s or today's Venezuela, did people change the official currency for others, "the Commerzbank experts point out.

In order for bitcoin to move to official money it has to be accepted as a means of payment or measurement of value by economic agents for their exchanges and also fulfills the function of being a unit of account and deposit of value. The official money is today in the developed countries unit of account, which allows to fix the prices of goods and services, something that bitcoin is not.

It is also undoubtedly a means of payment, since it is accepted by all people to pay for the purchase and sale of goods and services. And, finally, it is a store of value, which means that it keeps its value over time, since it has the capacity to buy goods and services in the future.

Under this context, the options are practically nil for bitcoin to be imposed as a means of payment. However, from the German bank believe that it would not be such an outlandish option for countries that have lost control over prices and have depauperate their currency.

"Private money with a limited volume would probably avoid dangerous bubbles in the financial and real estate markets, at least they would be less frequent than with official money," the bank's experts explain.