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Title: Price of BTC based upon supply analysis in relation to AU Post by: jbreher on March 14, 2013, 07:09:16 AM I'm sure we all daydream from time to time. I got to musing about what the price of BTC would be, if the market valued it on a par with gold.
According to one non-authoritative website, there may be approximately 10 Billion Troy Oz of gold mined in the history of the world. (http://money.howstuffworks.com/question213.htm (http://money.howstuffworks.com/question213.htm)). The precise number is inconsequential for the purposes of this back of the envelope analysis. Let's call it 10.5 B Oz to make the math simple. In the long term, there will be 21 M BTC mined. Accordingly, and ignoring the growth in mined gold, the trend is towards 500 Troy Oz of gold for every BTC (10.5B / 21M). Gold is currently trading at somewhere near $1600 Oz. This would suggest that, if the market valued gold and BTC about the same, then BTC should be worth approximately (500 OzAU / BTC)($1600/OzAU) = $800,000 / BTC. Will the market come to value BTC on par with AU? Who knows? If so, though, I could have a comfortable retirement. Yes, I can poke holes in this too. But it is one data point. Title: Re: Price of BTC based upon supply analysis in relation to AU Post by: jbreher on March 14, 2013, 07:15:09 AM InB4
The first stone... The market for a store of wealth is probably bounded. As such, demand for BTC (again assuming it comes to being valued on par with AU) would likely cannibalize demand for AU. Ignoring other stores of wealth puts a lower bound on this cannibilizaiton of a factor of 1/2. I'd be happy with a price of $400,000 per BTC. Title: Re: Price of BTC based upon supply analysis in relation to AU Post by: Melbustus on March 14, 2013, 07:28:00 AM Well, I kinda consider the upper bound on that calculation to be the amount of private-investment demand that gold enjoys, which is 16% of total mined gold if memory serves. (TODO: check wikipedia)
So, your $800k becomes $128,000. Bitcoin can't replace the jewelry demand that gold enjoys, which is something like 50% of total gold. Then there's industrial use... Central bank use is debatable. That leaves the above-noted private-investment demand. So what percent of that demand do you think might ultimately go to bitcoin? Sidenote: even just 1% looks pretty nice... Title: Re: Price of BTC based upon supply analysis in relation to AU Post by: jbreher on March 14, 2013, 07:34:50 AM I'd be happy with $128K.
ETA: lacking any evidence to the contrary, I'm happy to accept your factor of .16 for proportion of gold in private investments. Title: Re: Price of BTC based upon supply analysis in relation to AU Post by: yucca on March 14, 2013, 12:44:30 PM I have 10 BTC and I am 40, so it's possible I may buy a nice estate with them in my autumn years, crazy thought! :D
edit: on the subject of AU and BTC, take a look at this chart overlay, BTC time axis is stretched, but it seems the charts show correlation beyond coincidence, perhaps some fractal pattern common to both?: BTC==BLACK AU=RED http://www.silicondroid.com/btc/btcgold.jpg if the correlation continues then BTC may soon become a predictor of AU. Weird stuff. |
