Bitcoin valuation

[gollum]

Has anyone made a serious valuation on bitcoin with different scenarios?

We can compare Bitcoin to other assets in the world:

Gold: 10 Trillions $  - If 0,1% all gold holdings in the world were diversified into BitCoin the valuation would be 10 Billions $ -> 476 $/BTC

GDP/capita of the median country (Albania): 9000 $/capita. Median population/country in the world: 9 million people. Money spent online: 10% of GDP??
If bitcoin was a median country and the assets were equally distributed the average joe would have 2,3 BTC worth 9000$*10% = 900$ -> 391 $/BTC or a total market cap of 8 Billion $

Stock market cap: All publicly listed stocks in USA is worth almost 18 Trillion $ according to http://data.worldbank.org/indicator/CM.MKT.LCAP.CD
If 0,1% of that value were to be diversified into Bitcoin: 18 Billion $ -> 857 $/BTC

Money supply of USA (M1): 2 Trillions $ http://en.wikipedia.org/wiki/Money_supply#United_States
If we assume that Bitcoin is a miniature of USA with an economy worth 4% of the USA the money supply needed would be worth 80 Billion $ -> 3809 $/BTC

Conclusion:
If we just take the average valuation we end up on 1383 $/BTC or a market cap of 29 Billion $.

All figures are based on 21 million bitcoins.

Please present other relevant valuation models that can help us value bitcoin in a realistic (optimistic) scenario.

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[lebing]

Yes, people have done this and yes the numbers all come back insanely larger than where we are now. In the end the only thing that is for sure is that the price will either be >1000 in 5 years or 0.

[gollum]

Yes, people have done this and yes the numbers all come back insanely larger than where we are now. In the end the only thing that is for sure is that the price will either be >1000 in 5 years or 0.

Seems reasonable. Either heaven or hell.

I think 1 BTC = 1 oz Gold might be a good rule of thumb in a scenario where Bitcoin is the no. 1 internet currency & payment method.

[justusranvier]

http://www.reddit.com/r/Bitcoin/comments/1b0kj8/440000_each_a_best_case_scenario_for_bitcoin/

One bitcoin could potentially be worth up to $1 million in a best case scenario.

[Missionary]

Here is an (old but) interesting article on the subject:

http://falkvinge.net/2013/03/06/the-target-value-for-bitcoin-is-not-some-50-or-100-it-is-100000-to-1000000/

Falkvinge put his money where his mouth was when he went all in a couple of years ago, a good investment so far.

[gradient vector]

Bitcoin is definitely boom or bust but the ceiling is closer to 100,000.

[gollum]

If Bitcoin gains the market cap that Apple had before the iPhone 5 fiasko, each coin would be worth $30 500!
But that would require Bitcoin to become a religion, we need a Steve Jobs-figure in the Bitcoin-religion.

[yocko06]

yeah bitcoin will be hundreds of thousands 1day assuming nothing goes horribly wrong with the technology.
lol if it was a religion it would be exempt from laws and tax's, not a bad idea. id join the religion lol.
I believe in bitcoin.     

[phatsphere]

just curious, the 10 T$ for Gold, what is this number for Silver?

[w00t]

Yes, people have done this and yes the numbers all come back insanely larger than where we are now. In the end the only thing that is for sure is that the price will either be >1000 in 5 years or 0.

This is it.

It's going to be really big or really zero.

I did my own research (will share it later) and I got into valuation of millions USD per one BTC.

[cbeast]

Conclusion:
If we just take the average valuation we end up on 1383 $/BTC or a market cap of 29 Billion $.

I came up with something close. My estimate is that Bitcoin is 1337.

[mestar]

Falkvinge put his money where his mouth was when he went all in a couple of years ago, a good investment so far.

He was wrong, very wrong.  I would say he missed the link between bitcoin price, and the selling pressure due to mining.

If bitcoin price was 1,000,000 today, there would be a need for $2,000,000,000 to $3,000,000,000 in fresh money every day, because that's how much miners would spend in electricity costs.

Thats 2 billion dollars, per day.  Close to trillion per year.

[Missionary]

If bitcoin price was 1,000,000 today, there would be a need for $2,000,000,000 to $3,000,000,000 in fresh money every day, because that's how much miners would spend in electricity costs.

Thats 2 billion dollars, per day.  Close to trillion per year.

The electricity for mining riggs becomes a multi billion dollar industry just because the value of the market goes up? What are you talking about, good sir?

[mestar]

If bitcoin price was 1,000,000 today, there would be a need for $2,000,000,000 to $3,000,000,000 in fresh money every day, because that's how much miners would spend in electricity costs.

Thats 2 billion dollars, per day.  Close to trillion per year.

The electricity for mining riggs becomes a multi billion dollar industry just because the value of the market goes up? What are you talking about, good sir?

I know, its strange, but it's a simple argument:

-mining is a business with such a low barrier to entry, that most miners will have very low profits. 
-this ensures that most miner's cost of energy in BTC per BTC mined will be close to 1.
-awards are given in BTC, and energy costs have to be paid in other currencies

Those 3 together mean that a large part (50, 75%) of awards is always spent in energy, and it will always create a downward pressure on the price of bitcoin, and that presure will be linear with the price.  Higher the price, more the selling pressure.

[notme]

If bitcoin price was 1,000,000 today, there would be a need for $2,000,000,000 to $3,000,000,000 in fresh money every day, because that's how much miners would spend in electricity costs.

Thats 2 billion dollars, per day.  Close to trillion per year.

The electricity for mining riggs becomes a multi billion dollar industry just because the value of the market goes up? What are you talking about, good sir?

I know, its strange, but it's a simple argument:

-mining is a business with such a low barrier to entry, that most miners will have very low profits. 
-this ensures that most miner's cost of energy in BTC per BTC mined will be close to 1.
-awards are given in BTC, and energy costs have to be paid in other currencies

Those 3 together mean that a large part (50, 75%) of awards is always spent in energy, and it will always create a downward pressure on the price of bitcoin, and that presure will be linear with the price.  Higher the price, more the selling pressure.

Instead of the cost of electricity being close to 1 btc for 1 btc mined, it actually converges to 1-(cost of hardware/btc produced over life of hardware).  Especially with asics coming online, this second term is significant.

[notme]

Also, you are neglecting miners who consider the extra electricity as their investment capital and the bitcoin they earn as the asset they buy with that capital.  For that portion of the miners no USD funds are needed on the exchanges.

[manfred]

It could well be that bitcoins is a new "tulipomania".

If Bitcoin is a Ponzi or Pyramid scheme is debatable, it certainly is a get rich scheme for Satoshi.
Lets look at some quick facts. 2009 birth of Bitcoin. Not much happens for 20 months 6 million coins mined. Then slowly some geeks and tech savy persons get involved and start mining this cool new money. So far 10 million coins have been mined and since its all anonym who is to say the entity satoshi is not in control of over 50 % of all coins to date. So they can "pump and dump" as the feel and get hold of more coins in the process as they know when to get out of a particular move. Satoshi owed more than 50% on day one and always will.

Even if this is not the case one simple ruling can affect the price drastically. Governments are totally powerless to to anything to a individual miner. They are by now means powerless to act on exchanges or merchants accepting it. 1000 merchants accepting the coin in the world is nothing to worry about.

This truly "one world currency" is just an updated version of the existing Fiat system. A small group (satoshi entity) controls a lot of coins, the masses fight for the left overs. Even the (hundreds of)thousand of coins hoarded by the early adopters wont change anything. A simple Laptop want produce one third of all coins ever in circulation in a matter of months before early adopters jump on the bandwagon. Serious hardware is required!

http://www.youtube.com/watch?v=K5VC58gjnjY&list=UU-7vnmA1Zf1cRyqs9aR77ag

There is still (and always will be) a lot of unanswered Questions. On thing is certain there seams to be a lot of people keen to accept a one world currency.

[lebing]

It could well be that bitcoins is a new "tulipomania".

If Bitcoin is a Ponzi or Pyramid scheme is debatable, it certainly is a get rich scheme for Satoshi.
Lets look at some quick facts. 2009 birth of Bitcoin. Not much happens for 20 months 6 million coins mined. Then slowly some geeks and tech savy persons get involved and start mining this cool new money. So far 10 million coins have been mined and since its all anonym who is to say the entity satoshi is not in control of over 50 % of all coins to date. So they can "pump and dump" as the feel and get hold of more coins in the process as they know when to get out of a particular move. Satoshi owed more than 50% on day one and always will.

Even if this is not the case one simple ruling can affect the price drastically. Governments are totally powerless to to anything to a individual miner. They are by now means powerless to act on exchanges or merchants accepting it. 1000 merchants accepting the coin in the world is nothing to worry about.

This truly "one world currency" is just an updated version of the existing Fiat system. A small group (satoshi entity) controls a lot of coins, the masses fight for the left overs. Even the (hundreds of)thousand of coins hoarded by the early adopters wont change anything. A simple Laptop want produce one third of all coins ever in circulation in a matter of months before early adopters jump on the bandwagon. Serious hardware is required!

http://www.youtube.com/watch?v=K5VC58gjnjY&list=UU-7vnmA1Zf1cRyqs9aR77ag

There is still (and always will be) a lot of unanswered Questions. On thing is certain there seams to be a lot of people keen to accept a one world currency.

What do you see?

[cbeast]

What do you see?

A shotglass of Everclear?

[johnyj]

Unsold home 3.8 million 

[hiima]

I'm in this for an all or nothing bet, either win big or lose all.

[manfred]

I'm in this for an all or nothing bet, either win big or lose all.

Never put all your eggs in one basket.
http://www.marketoracle.co.uk/Article39704.html

[hiima]

I'm in this for an all or nothing bet, either win big or lose all.

Never put all your eggs in one basket.
http://www.marketoracle.co.uk/Article39704.html

Not an all eggs in one basket deal, more of a the eggs in this basket are gonna ride it out all the way.

[MWNinja]

What do you see?

A glass that is twice the size it needs to be.  Do I win a prize?

[johnyj]

I did a very conservative valuation months ago:

Suppose that there are 2 billion internet users and 1/10 of them can handle bitcoin technically, that is 200m users. Suppose each of them will put a small fraction of their retirement saving into bitcoin, which averages 1000 USD, then each coin will worth 10K. Raise that percentage, 100K is not impossible

Since the coins people can get from exchange is only a small fraction of all the existing coins, 1 million USD per coin is also possible

And this is only one of the area of potential usage based on existing human society, what about those unknown opportunities happening in the future?

[mestar]

Instead of the cost of electricity being close to 1 btc for 1 btc mined, it actually converges to 1-(cost of hardware/btc produced over life of hardware).  Especially with asics coming online, this second term is significant.

No.  The cost of producing one BTC will always tend to be close to one BTC in a long run.  The cost of hardware, or the power efficiency can never change this.

[mestar]

Also, you are neglecting miners who consider the extra electricity as their investment capital and the bitcoin they earn as the asset they buy with that capital.  For that portion of the miners no USD funds are needed on the exchanges.

I already said this elsewhere.  Those miners that choose not to sell their bitcoins are in fact investing that cost into bitcoins, same as if they directly bought them on an exchange.

So, for each new created bitcoin to be "exchange neutral", one of two things must happen:
-somebody must buy some (significant) part of that coin from the miner, so miner can pay his costs
-miner itself must pay this cost

In any case, a fresh money must come from somewhere.

[notme]

Instead of the cost of electricity being close to 1 btc for 1 btc mined, it actually converges to 1-(cost of hardware/btc produced over life of hardware).  Especially with asics coming online, this second term is significant.

No.  The cost of producing one BTC will always tend to be close to one BTC in a long run.  The cost of hardware, or the power efficiency can never change this.

Right, but the analysis I was responding to ignore hardware cost and only looked a electricity.