Anyone have fundamentals to support a higher value on BTC?

[humanitee]

You don't by chance have the R2 of that line? /nerd

[Chalkbot]

My fundamental analysis is not super technical at all, but it helps when I'm talking to people new to bitcoin understand the potential value:

I roughly estimate (google) the M2 money supply of the top 4 economies in the world (US, EU, China, Japan) to be somewhere between $20-30 Trillion dollars. I know that's a huge variable with about a hundred asterisks that should be tacked on the end, but you get the idea.

Next I assume that 1% of those nation's population decide to adopt bitcoin for 1% of their monetary transactions, for one of the many benefits that bitcoin offers. (Most of these are well known by now, so I won't include that here).

If we take the low end of my M2 estimate (and I'm leaving out most of the world here), $20T * 0.01 * 0.01, we get; $2,000,000,000 (Two Billion dollars). This would be the bitcoin market cap in my theoretical example.

So, we can take that number, and divide by the number of bitcoins in existence (I'll use 11 million for simplicity) and you get a rough valuation for a fair bitcoin price; ($181.82).

Amazingly enough, that is pretty close to where we are at! Now to facilitate rising prices, you really only need to consider "adoption" becoming more than 1%, or those adopters growing confident enough to use bitcoin for more than 1% of their transactions. For me, that's not hard to imagine. Bitcoin adoption just in the people that I know is up probably 300% this year over last year. Of course you might have a different experience, adjust values accordingly.

[Wuji]

Sunnakar,

There is still a lot of faith involved with Bitcoin as with so many things.  The fears most large market investors I talk to are the unknowns of trusting sites like MtGOX, initially mined coins, the feds to take action as BTC sky rockets, and the possibility of someone to alter the code to increase the number of coins.  Not to mention other ways the code could be altered.  I still believe the rush up from $50 is Cyprus and Spain moving money to BTC which I suspect is a temporary fear based move until they find something else.  It is too much of a coincidence this started on March 17th for it to be US investors.  Past run ups I've noticed always seem to happen after Bitcoin is in the news like now.

As for FinCEN I don't think they have fully green lighted anything to be honest.  FinCEN's role in government is to try to prevent money laundering.  The Federal Reserve, the FDIC, and the Secret Service are who I'm more concerned with as far as regulation of Bitcoins go.  Also each state has their own Money Exchange laws to contend with as well before mainstream implementation.  I'm quickly responding here so, I'll try to come back later to check for follow ups and offer more in depth thoughts.

As for your link to gold I did an analysis when gold was approaching its peak and determined a bubble.  My prediction was that gold should be at around $1200 and it seems headed that direction.

[zif33rs]

As for your link to gold I did an analysis when gold was approaching its peak and determined a bubble.  My prediction was that gold should be at around $1200 and it seems headed that direction.

I honestly feel this is where bitcoin is going to level out at in the next 6 months(hard to believe but possible) to 2 years(much more plausible). It is slowly gaining a measure of value and that is all gold is..just a belief that it will be worth tommorrow what it is today. Once businesses mainstream the use of bitcoin for transactions we will see parity between bitcoin and gold prices.

In the long term bitcoin will continue to increase in value while gold will fall to next to nothing. I'm basing this assumption that eventually mankind will eventually travel to nearby planets and asteroids for resources. At that point any metal based currency will become pointless. This is not tinfoil hat fantasy's...just as digital currency's are not. These things will happen in the next 10-50 years.

[mestar]

Remember, there are only two variables in the price function: transactional and speculative demand. Transactional demand is price agnostic and since prices are set at the margin this can go ballistic and likely is with all the free publicity Bitpay (March $5.2m versus previous monthly record of $700k) and Silk Road are receiving to stimulate the Bitcoin economy. Which leaves only speculative demand for determining the price. And Bitcoin holders can save them indefinitely. So the price melt-up could happen really fast.

Also, miners will sell some part of newly created coins to cover their running costs.   This is your third variable.  This one grows as the price of bitcoins grows.

[wopwop]

yes bitcoin needs a permanent Energy inflow to keep it alive
who's going to pay this

[move_zig]

You don't by chance have the R2 of that line? /nerd

Sorry, no. I had excel put in a trendline, but I don't know how it does it.

[Zalfrin]

You don't by chance have the R2 of that line? /nerd

Sorry, no. I had excel put in a trendline, but I don't know how it does it.

At least with older version of excel, you could go in to table properties and add things like equation and r^2

[Wuji]

"I honestly feel this is where bitcoin is going to level out at in the next 6 months".

Well I agree Bitcoins could easily be worth $1200 a piece someday, I think 6 months is being a bit exuberant.  Now if the government entities I spoke of before calm down investor concerns I might change my mind.  Once I see real life BTC ATMs working and getting through all the real world issues I mentioned early in this thread I'd change my mind.  If Western Union really accepts them after a year no gov. entity interference I'd change my mind.

I love Bitcoin and want it to succeed and go up.  I didn't sell off today but the increased volatility today does have me watching charts by the minute now and I'm ready to dump anywhere near $100.  Those of us in technology and watching BTC for a few years feel fairly safe at this point.  The problem though is many investors can't grasp the basic FAQs on BTC that I have talked to and the ones that do have major concerns.  

As much as I think gold is not that useful and about as useful as paper (very little gets used industrially), it does have a track record of thousands of years as a limited currency.  I seriously am amazed by those confident that one BTC could equal an ounce of gold in the short term.  I just don't see widespread adoption or trust happening and I've been investing for decades and discussing this with everyone I know.  Keep in mind there is only enough Gold mined so far to fill 3.42 olympic swimming pools (165k metric tons).  Now imagine how many people have jewelry, coins and own gold in underground vaults in NYC.  That is a very limited commodity with an extremely long track record, maybe the longest of any commodity/currency.

We live in such a black and white world I feel I need to recap my thoughts for those not taking time to read the whole thread.

- I'm a long term bull on BTC but getting more bearish as price goes up.
- I'm not a bull on gold and feel it is overvalued for the same reason as the BTC run-up.  Fear and a place to put Fiat currency for now.
- I'm only searching for tangible reasons why BTC should continue to rise to feel safer about my current BTC holding.  Like anyone else I don't want to sell off and lose.  But I also don't want to be that guy that holds on back down to $50 instead of selling high and buying back in at $50.

[Wuji]

I just wanted to point out something extra on the tomato soup index which has had me laughing all day today.

In the US we used to grow all of our own food.  Now we get most of our tomatoes from Mexico as they are not a winter crop.  They have to be shipped on trucks with diesel fuel and go through inspections.  Of course as oil spikes up imported food does as well.

Florida produces a lot of tomatoes but, has had problems for the last five winter growing seasons due to hurricanes or freezes that seriously hurt domestic tomato supply.  This is some reasoning why that is a very silly indicator of inflation.  Florida growers are currently trying to curtail NAFTA policies and cut Mexico off which will cause that index to probably triple, while real inflation will remain at it's fairly low growth rate.

Outside of growing up on a farm mostly as a soybean and rice farmer I gathered the rest of this info from articles like this one:

http://www.freshplaza.com/news_detail.asp?id=105346

[zif33rs]

As much as I think gold is not that useful and about as useful as paper (very little gets used industrially), it does have a track record of thousands of years as a limited currency.  I seriously am amazed by those confident that one BTC could equal an ounce of gold in the short term.  I just don't see widespread adoption or trust happening and I've been investing for decades and discussing this with everyone I know.  Keep in mind there is only enough Gold mined so far to fill 3.42 olympic swimming pools (165k metric tons).  Now imagine how many people have jewelry, coins and own gold in underground vaults in NYC.  That is a very limited commodity with an extremely long track record, maybe the longest of any commodity/currency.

1 metric ton = 35273.9619 ounces    35273.9619*165000=5820203713.5 ounces of gold planet wide. Why....thats not enough for every person to have 1 ounce..and its only valued at $1550 per ounce. So once you look at it like that...with only 11 million units available presently and probably 70% of those in cold storage....whew. 3300000 units to play with...    I am thinking a great number of people are now struggling to get some and will continue to do so.

70lb hideabelts or a usb stick?  Its a no brainer.

[jubalix]

Competition of Currencies and market penetration

/thread

[Wuji]

It is late and I'm not up for crunching numbers tonight but, I just want to point out that the large holders of Gold are nations.  I'll have to do research to get a full total of all nations holdings again as I haven't research gold in over a year (it is not an interest of mine).  This is why gold is the high price it is, not because it is used like BTC as a currency.  Because there is faith in Gold nations use it to backup their economies.  Also again Gold prices are high because no one knows where to put money and many feel it is safer than most currency.  Sorry this is a sloppy answer and hopefully I can provide data tomorrow when I'm more awake.

The main point is Gold is insurance and fear and speculation drove the price to $1800 an oz.  I'm drawing a parallel to BTC and saying it is used currently as a place to store money based more on fear and speculation than as currency.  The huge difference is BTC has been around a few years where gold has millenniums of history.  In other words BTC seems far more susceptible to volatility like we saw today than Gold is.  Less units of a commodity is not really a good thing if it isn't proven long term and trusted worldwide by a majority of people.  Less units means it is easier to manipulate by the wealthy and more susceptible to volatility.

[zif33rs]

I hear you on the late and tired.  

The point I am trying to get at I suppose is that gold has been a great currency with a remarkable track record..yes. But, in todays world it is rapidly losing its value do to fact that its hard to transport and exchange for other fiat in large amounts. It's hard to get out of town quick with a few hundred pounds of the shit strapped to your back. Also..it will not be long before the markets are flooded due to space exploration and development.

http://www.wired.com/wiredscience/2012/04/planetary-resources-asteroid-mining/

Nearly 9,000 asteroids larger than 150 feet in diameter orbit near the Earth. Some could contain as much platinum as is mined in an entire year on Earth, making them potentially worth several billion dollars each. The right kinds of investment could reap huge rewards for those willing to take the risk.

http://qz.com/47232/the-crazy-economics-of-mining-asteroids-for-gold-and-platinum/

Currencys as we knew them..sea shells, cattle , tulip's and gold are going the way of the dinosaurs. Digital currencys are the only thing that makes long term sense to me.

[Elwar]

You would think with the openness of Bitcoin that there would be enough metrics to get a good idea for the market price based upon mining difficulty/cost of mining/daily Bitcoin transfers/MtGox daily volume.

There should tend to be some link to the price of mining. There is the auto corrector if the price goes too far beyond the price of mining that more people will start mining instead of buying on an exchange.

Though with the current ASIC delivery unknown, the price has sort of decoupled from the mining cost. Though you could certainly calculate the price compared to the cost of mining with GPUs to get a tidbit of information.

The amount of money coming into Bitcoin would be the main indicator of market value. Though that is hard to pin down. Daily volume of the blockchain and MtGox can give some indicators.

[ruggedman_dan]

Before Fiat currency, money was based on Gold.  I believe that change happened in 1973 and dollars didn't rise at this rate before then.  Gold is a limited resource like BTC.  Why is BTC expected to rise soon to $1000 or $10000 when limit currencies have not behaved that way in the past?  A good article I found today on why these speculation based rises actually will more likely hurt Bitcoin as viable currency than help.  Bitcoin is going from currency to commodity it seems at the moment.  I'll be happier if it goes back to being more of a currency again.

http://blogs.reuters.com/felix-salmon/2013/04/03/why-bitcoins-rise-is-nothing-to-celebrate/

I so totally agree with you here.

Places like bitcoinstore scratch the surface of what the economy really needs.

How can BTC flourish as a currency when it is currently not being used as such? All speculative projects aside, what do we REALLY have to spend BTC on? When I say we, I refer to the public, not us coin-nerds.

I'm talking about important services and everyday tangible goods. These are what we lack at-the-moment. The general public is not spending money on VPN subscriptions and Bitcoin t-shirts.

[Wuji]

zif33rs, I agree completely with your last post which is why I love BTC.  This is why I'm long on BTC but just not seeing the adoption rate yet and trying to find more concrete answers to the run up.  I re-read your post on Gold vs. BTC and noted you bolded my comment about "very limited currency".  I need to look at the ratio closer for supply vs. demand tomorrow for a real comparison.

Elwar, good points and we need more respected trading place to trade BTC soon and I really hope that happens.  We need other large legitimate MtGOX type exchanges based in the USA.  We also need to get more vendors to adopt BTC.  This will be a good litmus test for the government (agencies I referenced earlier) to see what kind of legislation they come up with.

ruggedman_dan, Sounds like we are on the same page.  If we want BTC to go up in value we need to focus on how to make BTC a viable currency and get more vendor adoption.

[byronbb]

The Internet needs a currency. Bitcoin is the best solution.

[crazy_rabbit]

Scarcity. Bitcoin is perhaps the scarcest global digital resource on the planet. Hence we can assign it value- because we know how scarce it is.

[mp420]

The one fundamental that's supporting Bitcoin's high price:

MtGox verification queue.

(This is also called demand.)