To compare Bitcoin with all the money in the world, let's turn to the infographic prepared by the site.

Since 2009, Bitcoin has come a long way and overcome many obstacles. Bitcoin's price has skyrocketed, and its market capitalization at the time of this writing is estimated at $41 billion, equal to Google co-founder Larry Page's net worth.

Bill Gates, the richest man on Earth, has money like Larry Page along with Bitcoin.

Bitcoin equals Morocco

“Bitcoin is the Uber of cryptocurrency - the biggest, coolest and most famous, but not the only one. Add in Litecoin, Monero and all the others, and you get the total amount of virtual money wandering on the Internet, where neither governments nor banks can get their hands on it. This is no less than 100 billion dollars. This is the same as the GDP of Morocco, the 60th largest economy in the world,” notes Raoul Amoros.

Today, information technology companies dominate the market like never before. Giants such as Amazon ($402 billion) and Apple ($730 billion) have equaled the GDP of much larger countries, such as Nigeria and the Netherlands, respectively. Apple's monetary valuation is 18 times Bitcoin's market capitalization.

“Let's zoom in. The amount of money in dollar bills and coins circulating in the world is $1.5 trillion. This number is 36 times the market capitalization of Bitcoin.”

Unlike money that is not backed by metal reserves, gold plays an important role due to its scarcity. Gold was the basis of money from the beginning of history until the 1960s. According to the latest estimates, there are 171,300 tons of gold in the world, which is valued at $8.2 trillion. This is the market capitalization of Bitcoin taken 200 times.

Let's get back to money, specifically narrow money, which is valued at $31 trillion. Tight money is all the money in circulation (cash and money in accounts that can be spent). This value exceeds Bitcoin's market capitalization by 750 times.

Broad money is all types of assets that can be used to make payments or as a store of value. They are valued at $83 trillion, which is 2,000 times the market capitalization of Bitcoin and 2.5 times the volume of tight money. It becomes obvious that our financial system will collapse if everyone tries to withdraw money that should be easily converted into cash.

“If Bitcoin's faltering growth tells us anything, it is that people are losing trust in money and other traditional ways of measuring wealth,” concludes Raul Amoros. “Let's return to this conversation when the market capitalization of cryptocurrencies overtakes the world's gold reserves...”

An assessment of any sector of a country’s economy is impossible in isolation from an analysis of trends characteristic of this industry throughout the global market, since individual macroeconomic factors can significantly distort the picture in individual countries in the short and medium term. In this and subsequent articles we will look at the global gold market, the dynamics of the main production and financial indicators of its largest players, the place of the Russian gold mining industry in the world, general and multidirectional trends in the domestic and global gold mining industries.

The past year has been a turning point for the global gold mining industry. Despite maintaining positive production growth rates, it is safe to say that the decline in gold prices over recent years has finally begun to affect production volumes, so far only as a result of lower capital costs and investments in the development of new deposits.

Russia is the third largest gold producer in the world, and, even despite support from the exchange rate, the dynamics of production indicators in the industry as a whole correspond to the global trend. Production throughout the country in 2015, according to the United States Geological Survey (USGS), decreased by 2% (from 247 to 242 tons).

The Russian gold mining industry is an integral part of the global gold market and is therefore subject to the influence of the same macroeconomic and market factors. Not the most stable exchange rate can seriously affect the state of affairs in the industry, but how significant such an impact can be in the conditions of equipment imports and the presence of debt obligations in foreign currency is a question without a clear answer.

To get a better idea of ​​how things are going in the world, let’s take a brief look at several of the largest gold-mining countries and companies that account for a significant portion of the precious metal’s production.

The scale of activity of gold mining companies does not always correspond to the scale of production in the specific countries to which these companies belong. In the context of globalization, gold mining has long gone beyond state borders, and therefore, before moving directly to companies, let’s look at the “political” map of world production of the precious metal.

Gold production by country of the world, tons

Gold production by the world's ten largest producing countries in 2014 and 2015. according to United States Geological Survey (USGS)

Data from the US Geological Survey on production in Russia differ significantly from the data of our Union of Gold Miners, which in 2015 reported on the production of 290 tons of gold in the country and an increase in production by 2 tons compared to 2014. However, for comparison it is advisable to use data obtained from the same source. Globally in 2015, according to various sources, there was an increase in production from 0.3 to 1%. The largest increase occurred (by chance?) in countries whose currencies weakened against the US dollar during the year: China and Australia. Russia was an exception; however, as already noted, production volumes vary from source to source.

Production growth in 2015 was the lowest since 2009, and lower exploration and development costs could help fuel this trend.

Gold production in the world 2005-2015, tons

In 2015, 6 out of 10 companies reduced production volumes, which is mainly due to low gold prices, one of the consequences of which is a reduction in capital costs and the volume of development of new deposits. The weakening of national currencies has a short-term positive impact mainly on those companies that operate within the same or closely related markets, which explains the generally worse dynamics of gold production by the largest producing companies, which, in most cases, operate in several markets.

Gold production by the world's ten largest gold mining companies in 2014 and 2015, million ounces

Nationality and geography of activities of the world's largest gold mining companies

Before touching on the financial performance of the industry's largest players, it is worth saying a few words about gold reserves. The provision of reserves affects the stability of production activities, since the low level of available reserves requires regular expenditure on exploration or acquisition of new deposits, which in conditions of low prices can become a big problem for companies.

Ten largest companies by volume of proven and probable reserves (P&P, JORC) as of January 1, 2015.

By dividing reserves by annual production volumes, you can approximately calculate how many years the company will have enough available resources. By the way, the Russian Polyus is the most secure company among the world's major gold miners.

Production volumes are not always indicative of the state of affairs in the industry, since they react rather slowly and not always unambiguously to a decrease in the price of gold and, as a consequence, a decrease in capital investments of companies. Financial indicators are much more representative. Let's focus on capitalization for now.

Capitalization of the largest gold producers, billion US dollars

Over the past 5 years, the total valuation of the largest players in the industry has fallen by half, which is explained by the strengthening of the dollar, falling gold prices and the decline in the value of assets located in markets whose currencies have been losing value (most gold is mined in developing countries).

Average annual price of gold, US dollars

The decline in industry capitalization is a natural reaction to the poor financial situation of gold miners. Thus, the world's largest gold mining company shows negative revenue growth rates for the third year in a row. In the first quarter of 2016, sales in monetary terms decreased compared to the same period last year, even despite the increase in the price of gold. The situation is similar for other market players.

The specificity of gold as an investment product affects its price, the volatility of which is much higher than the volatility of prices for most other fossil resources, which is explained by the high share of the investment component in the structure of demand.

Structure of gold demand in 2015

Investment demand in general is less stable than other components of demand. Demand from central banks of countries is also unstable. In addition to the fact that a large amount of unused metal at the disposal of central banks of countries is a potential supply, demand on their part can be not only purely market in nature, but also have political implications. Separately, it is worth mentioning about “paper” gold - trading volumes in futures for the precious metal are tens of times higher than trading volumes with the actual supply of metal, which makes prices unpredictable for the market and subject to speculation.

According to the World Gold Council, since 2014, the supply of gold has exceeded demand, and this was also the case in the first quarter of 2016. However, the prospects for decreased production and increased demand from central banks give hope for an increase in the value of the precious metal.

In addition to prices, the problem for the industry remains the reduction in capital investments when deposits with high gold content in ore are depleted. The low level of investment in the development of new deposits may, over time, lead to an increase in average costs per ounce of mined metal and a decrease in already price-pressured margins.

Next time we will take a closer look at the financial indicators of the largest companies in the global gold mining industry and their trends, and compare them with the financial indicators of Russian companies.

The total market capitalization of the cryptocurrency market recently exceeded $300 billion. This figure is both inspiring and frightening.

The world of digital currencies, which emerged less than a decade ago, has grown astronomically in a short period of time. The rapid growth of new cryptocurrencies in the wake of the ICO boom has interested investors all over the world. Thus, in 2017 alone, Bitcoin soared from $800 to almost $10,000. There is a month left until the end of the year, and Bitcoin has a chance to outpace the most daring forecasts of analysts and set a new record .

So it turns out that Bitcoin is the most impressive asset that is getting ready to take over the world? You can look at the cryptocurrency market with fear, but you can approach it soberly and understand that Bitcoin is only at the very beginning of its development. For now, Bitcoin is a small fish.

Cryptocurrencies vs gold

If you compare the $300 billion capitalization of the cryptocurrency market with the commodity asset market, it immediately becomes clear that digital currency is still splashing in shallow waters.

Gold, which Bitcoin is supposed to compete with, has a market capitalization of $6 trillion. In addition, it must be taken into account that only a fifth of gold is traded on the market as an investment product, the rest is in the form of jewelry, and is also located in government vaults or is still underground.

Thus, the capitalization of investment gold is about $1.2 trillion. Considering that the value of all gold is just over $7 trillion, about $1.6 trillion is used for private investment, which is more than 5 times the total capitalization of cryptocurrencies.

Let's take a closer look at the investment markets. Stocks, another investment asset, have a market capitalization of $55 trillion; another $94 trillion in mortgage securities (securitization) and $162 trillion in residential real estate.

Bitcoin is not overpriced

Of course, the price of Bitcoin is breaking records in speed, but the capitalization size is low compared to the global market. Looking at the capitalization of various investment-related areas, it is difficult to call Bitcoin a bubble. The cryptocurrency market represents only 0.3% of the total market for real estate, securitized debt, equities, commercial real estate, farmland and gold.

Based on the above indicators, Bitcoin and other cryptocurrencies can hardly be called a huge bubble.

When it comes to bubbles and overvaluation, investor and ardent Bitcoin supporter states:

“There is now $200 trillion in the world - in cash, stocks, bonds and gold. These four assets are overvalued in my opinion. If 0.5% of that $200 trillion is in Bitcoin, you will have a capitalization of $1 trillion, which will be higher than Apple Computers, the most valuable company in the world.”

Critics of cryptocurrencies argue that this market is built on sand and does not have a solid foundation to support incredibly inflated prices. But the tokenization of gold led to the emergence of gold-backed cryptocurrencies. The emergence of real value in digital coins pulls the rug from under critics.

The cryptocurrency market is experiencing rapid growth. The price of Bitcoin has already broken through the $7,000 mark, andcosts more than $300 with a capitalization of about $30 billion. You can also recall Ripple and other cryptocurrencies that have emerged in different parts of the world.

Considering the latest advances in blockchain technology, it is safe to say that this market has a bright future ahead of it. Individuals, corporations and even governments of some countries are showing keen interest in the opportunities that the cryptocurrency market offers. Indeed, cryptocurrencies have literally burst into financial markets, and many experts see them as the future of payment systems.

Lack of material value of cryptocurrencies

But critics of cryptocurrencies argue that there is no real basis to support such inflated prices. The market capitalization of Ethereum is around 30 billion, and Bitcoin is over 100 billion US dollars. This is more than the market capitalization of such powerful global corporations as BHP Billiton, Morgan Stanley and Goldman Sachs.

Most opponents of cryptocurrencies becoming the main means of payment in the future base their arguments on the fact that there is no single regulator in this market. Others believe that this market will soon collapse as cryptocurrencies have no material value.

In the case of traditional currencies, central banks hold reserves of gold bullion, economies, and other valuable assets that are designed to support the value of the respective country's currency. All this gives paper currency material value. Bitcoin does not have this, and critics believe that the price is dictated solely by supply and demand.

However, the technology on which cryptocurrencies rely has made it possible for other digital assets to emerge. One of the most interesting examples in recent years is the marking of gold bars. Traders are now able to trade gold tokens just like any other cryptocurrency.

But the most interesting thing about this is that this marking of gold contributed to the development of the cryptocurrency market. Gold has long been an important financial market instrument, and investors have the opportunity to trade it through gold-linked exchange-traded funds.

Now the cryptocurrency market, usingand the structure characteristic of “gold” ETFs, can offer investors new trading instruments called gold-backed cryptocurrencies.

It is quite natural that the popularity of the latter is steadily growing, and even many critics of cryptocurrencies have paid attention to them. Those who argue that the market's rapid growth is not backed by material value are missing their main argument, since gold-backed cryptocurrencies such as GoldMint, ZenGold and OneGram do.

For example, in the case of OneGram, each token is backed by one gram of gold, which is stored in a vault located in the duty-free area of ​​Dubai Airport. The same scheme is used in ZenGold, and GoldMint, based on a private blockchain, issues tokens backed by physical gold or exchange-traded funds at the current market value of this metal.

The emergence of gold-backed cryptocurrencies means that these trading instruments are gaining material value. And this fact can push even critics to.

Conclusion

In theory, the price of gold and all digital currencies depends on the value of various national currencies. But in practice, the main basis for valuation is the US dollar. The price of gold and cryptocurrencies, expressed in a particular fiat currency, depends on the strength (value) of that currency. Therefore, many experts consider gold and cryptocurrencies as two parallel instruments in which they can either invest or trade.

However, now, with the advent of gold-backed cryptocurrencies, the situation is changing. Both possibilities are combined into one unique tool that is suitable for both gold and cryptocurrency supporters.

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