Maybe the economy does support the price...

[hacknoid]

Reading the article from Forbes yesterday (http://www.forbes.com/sites/timworstall/2013/03/31/links-31-march-is-bitcoin-doing-well-or-is-it-just-a-bubble/), the quote is that the US has a GDP of ~$15 trillion, with a monetary base of $600 billion as an example of how the value of the currency supports the economy (and granted the article states that transaction value should be many times higher than GDP).  But, for some back-of-the napkin calculations, let use this.

Bitcoinwatch shows roughly 1.2m coins sent yesterday.  Generally speaking, the four main areas where bitcoins are sent around seem to be:
1) buying coins as an investment (speculators)
2) trading for goods and services (economy)
3) mining
4) moving between user's own wallets.

1) is pretty easy, as it is basically all done on the major exchanges. (I assume no major trades are down without some service, especially as the value goes higher, as I don't want to just agree to send some guy $10K for coins).  This number then is the total of all the exchanges, which on busy days approaches 200K coins.
2) is what we are interested in.
3) is pretty small - 3600 coins per day (although lets say 4000 since the blocks solved per day is a bit higher with increasing hashing)
4) is anybody's guess.

So, using 1) and 3), we get 1,200,000 - 200,000 - 4000 = ~1M BTC.

Let's be generous and say half of those remaining coins are going between a user's own wallets - that leave 500,000 BTC, or about $50M per day for goods and services.  Annually that amounts to $18.25 billion.  Now, that's proportionally a bit smaller than the US GDP to the monetary base, and certainly much smaller than an expected transaction value), but it is really that far out?  I also think the actual number could be much higher - potentially twice that.

And for a rapidly growing economy I would argue its easy to see we are in line with proper numbers...

Just my BTC.02 and I might be way off base, but is seems interesting...  Feel free to correct any glaring errors you see!

[Synapse_On_Slush]

BTC.0002 you mean hehe :p

[Stephen Gornick]

that leave 500,000 BTC, or about $50M per day for goods and services.  Annually that amounts to $18.25 billion.

And which vendors might be doing in aggregate even a tiny fraction of this $50M per day?

I commented on this:

About a week ago, BitPay, the largest (by a wide margin) bitcoin payment processor reported month-to-date transactions through merchants using their service of $2 million.

Yes,  $2 million for about three weeks.    Obvoiusly, that's growing fast -- but let's give it 100X growth over the next year, to $200 million a month, or about $2.4 billion on an annual basis.  If the U.S. GDP of $16 trillion works off of $1 trillion of money supply that's 16:1 of transactions of economic activity versus the money supply (velocity would be 16, calculating it that way).

So using that same number, the $2.4 billion of economic activity and velocity of 16 means bitcoin's value a year from now should be about $150 million, or about a BTC/USD of $12.50.

[hacknoid]

And which vendors might be doing in aggregate even a tiny fraction of this $50M per day?

I commented on this:

About a week ago, BitPay, the largest (by a wide margin) bitcoin payment processor reported month-to-date transactions through merchants using their service of $2 million.

Yes,  $2 million for about three weeks.    Obvoiusly, that's growing fast -- but let's give it 100X growth over the next year, to $200 million a month, or about $2.4 billion on an annual basis.  If the U.S. GDP of $16 trillion works off of $1 trillion of money supply that's 16:1 of transactions of economic activity versus the money supply (velocity would be 16, calculating it that way).

So using that same number, the $2.4 billion of economic activity and velocity of 16 means bitcoin's value a year from now should be about $150 million, or about a BTC/USD of $12.50.

Ah thanks... hadn't kept up on that discussion.. too much news lately to keep on top of all the discussions! 

And yes, the numbers could very well be off... and I don't know who the senders/receivers are.  The only point I was trying to make was there is a lot of unaccounted for BTC changing hands (or at least wallets), so some value is going somewhere.  And if the desire is to transmit $X worth of BTC, then to keep this up the value needs to remain proportional.  Decrease the value of bitcoins by say 10 then the number of bitcoin transferred (might be) 10 times.  Clearly someone is finding a use for moving them around...

[notme]

that leave 500,000 BTC, or about $50M per day for goods and services.  Annually that amounts to $18.25 billion.

And which vendors might be doing in aggregate even a tiny fraction of this $50M per day?

I commented on this:

About a week ago, BitPay, the largest (by a wide margin) bitcoin payment processor reported month-to-date transactions through merchants using their service of $2 million.

Yes,  $2 million for about three weeks.    Obvoiusly, that's growing fast -- but let's give it 100X growth over the next year, to $200 million a month, or about $2.4 billion on an annual basis.  If the U.S. GDP of $16 trillion works off of $1 trillion of money supply that's 16:1 of transactions of economic activity versus the money supply (velocity would be 16, calculating it that way).

So using that same number, the $2.4 billion of economic activity and velocity of 16 means bitcoin's value a year from now should be about $150 million, or about a BTC/USD of $12.50.

The reason this isn't a fair comparison is that bitcoin is perceived by its supporters as a better store of value than the dollar, so the gdp:supply ratio should be much lower for Bitcoin.

[lebing]

The reason this isn't a fair comparison is that bitcoin is perceived by its supporters as a better store of value than the dollar

Yes, exactly. Its more akin to gold at this stage than it is to a fiat currency. I dont think the usage of other utilities of bitcoin (including transferability) will catch up to the wealth preservation utility until we get deep into 4 digits.

[yeemartin]

that leave 500,000 BTC, or about $50M per day for goods and services.  Annually that amounts to $18.25 billion.

And which vendors might be doing in aggregate even a tiny fraction of this $50M per day?

I commented on this:

About a week ago, BitPay, the largest (by a wide margin) bitcoin payment processor reported month-to-date transactions through merchants using their service of $2 million.

Yes,  $2 million for about three weeks.    Obvoiusly, that's growing fast -- but let's give it 100X growth over the next year, to $200 million a month, or about $2.4 billion on an annual basis.  If the U.S. GDP of $16 trillion works off of $1 trillion of money supply that's 16:1 of transactions of economic activity versus the money supply (velocity would be 16, calculating it that way).

So using that same number, the $2.4 billion of economic activity and velocity of 16 means bitcoin's value a year from now should be about $150 million, or about a BTC/USD of $12.50.

There is no fractional reserve banking for bitcoin, so you cannot compare dollar and bitcoin in this way.

[desper]

Reading the article from Forbes yesterday (http://www.forbes.com/sites/timworstall/2013/03/31/links-31-march-is-bitcoin-doing-well-or-is-it-just-a-bubble/), the quote is that the US has a GDP of ~$15 trillion, with a monetary base of $600 billion as an example of how the value of the currency supports the economy (and granted the article states that transaction value should be many times higher than GDP).  But, for some back-of-the napkin calculations, let use this.

Take a look at: http://en.wikipedia.org/wiki/Monetary_base
According to the graph on wikipedia, the monetary base of the USD is now about $2.5 trillion (it has risen sharply since 2008). Monetary base is a narrow definition of money supply--see the Wikipedia article. So even $2.5 trillion may be a low figure to take for money supply and compare with the total BTC in circulation.  The figure for US GDP appears correct.

The graph of estimated daily bitcoin transaction volume (http://blockchain.info/charts/estimated-transaction-volume?showDataPoints=false&timespan=&show_header=true&daysAverageString=7&scale=0&address=) seems to show a lull near the end of December/beginning of January--maybe due to the holiday period. After this, it has risen sharply and is about 30% to 40% above typical levels of last year. This period seems to coincide with the exponential USDBTC price growth we've seen since January.

With the large backlog of people wait for accounts to be opened at MtGox, I don't think there will be a drop in price immediately. After this, who knows?

[hacknoid]

I'm curious as to why the transaction volume from blockchain.info shows ~300k BTC per day, while bitcoinwatch.com shows over a million (right now, it says 2.5m).  Clearly they are counting the volume differently, but can anybody explain to me why (or point me in the right direction)?

Thanks!

[piramida]

I'm curious as to why the transaction volume from blockchain.info shows ~300k BTC per day, while bitcoinwatch.com shows over a million (right now, it says 2.5m).  Clearly they are counting the volume differently, but can anybody explain to me why (or point me in the right direction)?

Thanks!

blockchain removes change from the equation. so say, your wallet has 1000 BTC input, you send 1 BTC somewhere, that is 1 BTC sent and 999 change (rough), so in blockchain's case that would be 1 BTC of volume (correct) while if you only added values it would yield 1000 BTC volume (incorrect).