Tool: Calculate the future value of a single Bitcoin

[Mcoroklo]

As a funny project on the side, I am making a Bitcoin website with some tools and other fun stuff for Europeans.

However, I wanted to share one of the tools I made, because I think it's quite funny!

"Calculate the future value of Bitcoins"
Inspired by Falkvinges blog post about the future value of Bitcoins, I wanted to visualize these numbers. This is also a way to show that the future value of a Bitcoin, if it becomes mainstream, won't be 1000$ or 10000$, but a lot more.

Play around with the numbers here:
» Calculate the future value of Bitcoins

Discussion:
- Does it make ANY sense to make a calculation like this?
- What percentage of Bitcoins will be lost / use for investing?
- What is a realistic percentage of the world economy (probably closer to 0,1% than 100%)?


And for those who missed the link to the tool ;-) :
http://www.btcglobe.com/tool/calculate-future

[calmindifference]

Good work..
But one suggestion - UK and US people are more accustomed to seeing comma as a decimal group separator. Prehaps the number formating could be regionalised?

[teodor87]

Again - get real. 1% of the world economy is ~ 300,000,000,000.00USD.

That's 300 billion. The total amount of coins ever is going to be 84 million.

It means that in that rate a coin will be worth ~3571.42$ per coin.

If it goes so high inflation will destroy world's economy. It might go to 1000000$ per coin, then drop to 1000$ because there are no real money to cash you out!

Do you get it or shall I explain in more detail?

Let's get it a bit easier.

If a bitcoin is worth 100$ today, and there are for instance (just an example) 1,000,000 BTC traded every day through MtGox, it means that MtGox needs 100,000,000$ to exchange all these. However if it goes to 200$ for a single day it will need 200,000,000$. Do you really think they have that kind of leverage? Who is their liquidity provider? The Federal Reserve?

If it gets so expensive so fast it will burst. Yes it might increase in value, but it shall happen within reasonable timeframe of years in order for the exchangers to be able to adjust the volume and money supply they currently have. Otherwise a lot of people will end up burning up graphic cards and all kind of equipment for mining and thousands of BTCs worth nothing.

Another thing that no one thinks about and no one can control - greed.
Most of the bitcoin exchange is done by DIY traders, not miners. When it gets expensive, they sell. Period. They do not care about the whole picture.
If Gox bankrupts it all goes south.

[nkspace]

+1

[hello_good_sir]

You're doing the numbers wrong because you're not adding in the value of coins being used as savings.

So where you multiply by the fraction being used for transaction instead multiply by the square.  So let's say that the price is $X and 100% of coins are used for transactions.  Now I move the slider so that it says 50% are used for transactions.  The price should go to 4X, not 2X.  This is because the value of the coins in circulation goes to 2X, but the value in savings is also 2X.

[teodor87]

You're doing the numbers wrong because you're not adding in the value of coins being used as savings.

So where you multiply by the fraction being used for transaction instead multiply by the square.  So let's say that the price is $X and 100% of coins are used for transactions.  Now I move the slider so that it says 50% are used for transactions.  The price should go to 4X, not 2X.  This is because the value of the coins in circulation goes to 2X, but the value in savings is also 2X.

Agreed. However, not all bitcoins will be sold. Exchanges do not have that much money.
Total capitalization is ~ 3,207,666,840.00$ by now.

[amihh]

The total amount of coins ever is going to be 84 million.
It might go to 1000000$ per coin!

84 million is litecoin, for bitcoin it's 21 milloin.

Soon, when Bitcoin will pass $1000 people will use mBTC as it will be easier to talk about something near 1USD in value. It is not a mathematical problem or a technical problem, just our wetware limitations.

Don't forget that each bitcoin is not divided into 100 [per]cents like regular FIAT currrency, but into 100,000,000 sub units, so 1 millionth of a bitcoin still has 100 [per]cents and if and when 1BTC will reach the neighborhood of 1 Million USD people will switch from talking about mBTC to uBTC or the more accurate spelling: µBTC.

Inflation in USD makes cents not so useful and this leaves room for 0.01µBTC to be equal 1 USD.

If it gets so expensive so fast it will burst. Yes it might increase in value, but it shall happen within reasonable timeframe of years

What is your definition of "so fast"? It will take several years and even if it takes a decade it is still a good investment.

[coinft]

You're doing the numbers wrong because you're not adding in the value of coins being used as savings.

So where you multiply by the fraction being used for transaction instead multiply by the square.  So let's say that the price is $X and 100% of coins are used for transactions.  Now I move the slider so that it says 50% are used for transactions.  The price should go to 4X, not 2X.  This is because the value of the coins in circulation goes to 2X, but the value in savings is also 2X.

Agreed. However, not all bitcoins will be sold. Exchanges do not have that much money.
Total capitalization is ~ 3,207,666,840.00$ by now.

However exchanges do not sell bitcoins at all, their customers sell and buy.

Your picture is like assuming the New York Stock Exchange going bankrupt if Apple appreciates too much, because they can't afford to buy them any more. News flash: they facilitate trades, but don't trade on their own.

[amihh]

However exchanges do not sell bitcoins at all, their customers sell and buy.

Actually, the exchange earns money from every trade and they earn both USD and BTC as they take some from both parties for the privilege to trade using their market.

[teodor87]

Yes, but in order to facilitate trades, people need to BUY and sell.

And if price skyrockets, I guarantee that people will mostly want to SELL.

Unable to handle those and not having enough cash, all orders past a certain level will be cancelled.

[coinft]

Yes, but in order to facilitate trades, people need to BUY and sell.

And if price skyrockets, I guarantee that people will mostly want to SELL.

Unable to handle those and not having enough cash, all orders past a certain level will be cancelled.

No not canceled, just unfulfilled until there are enough buyers. There's a fundamental difference.

You are right if you want to point out current market cap does not imply the ability to actually move large amounts for the current price, but that's really old news. Of course the price will move with supply and demand, and sometimes overshoot.

[amihh]

New buyers will come to the market. For example, I only heard of bitcoin when it crossed $100 a couple of weeks ago. I started mining as soon as possible but now I understand the value of it more and want to buy.

The verification process for the wire transfer takes a few days and when I get approved I plan on buying both BTC and LTC with a significant part of my savings. I believe bitcoin is extremely cheap and will grow by several orders of magnitude in the coming years.

I wish I knew about it when it was $0.05 per bitcoin but this kind of thinking is not useful. I'm sure in 3 years we'll be able to look back at this time and think the same.

[Jackin Jill]

Again - get real. 1% of the world economy is ~ 300,000,000,000.00USD.

That's 300 billion. The total amount of coins ever is going to be 84 million.

It means that in that rate a coin will be worth ~3571.42$ per coin.

If it goes so high inflation will destroy world's economy. It might go to 1000000$ per coin, then drop to 1000$ because there are no real money to cash you out!

Do you get it or shall I explain in more detail?

Let's get it a bit easier.

I honestly stopped reading the thread after I read to this part.

Firstly, how does 21M btc turn into 84M?

Secondly, those 21,000,000btc have 8 decimal places of fractions behind them making 2.1 quadrillion fractions that can be used for currency.

Let me make this a bit easier for you.

Your math is off. There is not enough currency on the planet to cover 2.1 quadrillion.
Btc for the win.

[Jackin Jill]

And if price skyrockets, I guarantee that people will mostly want to SELL.

You're not a Joker, you're a clown.

How can you honestly say that you can guarantee anything? Especially what people want?

Guarantee me a sandwich. This bull is making me hungry.

[theta]

It seems you are basing your valuation on the assumption that BTC available for trading (i.e. not hoarded) should be at least equal in value to the annual global transaction value of the BTC economy. I would argue that it should be the weekly global transaction value instead, i.e. the amount of time it takes for a complete cycle fiat->BTC->fiat, or if fiat is completely bypassed, then the daily such figure. So you should divide the valuation you reach by something between 50 and 365.

[Realpra]

I would look at the amount of currency in circulation. We don't know these numbers exactly for the entire world, but approximations can be made.

The assumption that world GDP = total currency is wrong I think. I'm guessing total currency is higher than what is transacted per year.

You could also make an input box or some radio buttons with suggestions like "Using world GDP"/"Using est. world currency pool"/"avg personal wealth and BTC/person"...


(Nice Lars! Jeg må snart sende min egen update )

[TheSwede75]

Again - get real. 1% of the world economy is ~ 300,000,000,000.00USD.

That's 300 billion. The total amount of coins ever is going to be 84 million.

It means that in that rate a coin will be worth ~3571.42$ per coin.

If it goes so high inflation will destroy world's economy. It might go to 1000000$ per coin, then drop to 1000$ because there are no real money to cash you out!

Do you get it or shall I explain in more detail?

Let's get it a bit easier.

If a bitcoin is worth 100$ today, and there are for instance (just an example) 1,000,000 BTC traded every day through MtGox, it means that MtGox needs 100,000,000$ to exchange all these. However if it goes to 200$ for a single day it will need 200,000,000$. Do you really think they have that kind of leverage? Who is their liquidity provider? The Federal Reserve?

If it gets so expensive so fast it will burst. Yes it might increase in value, but it shall happen within reasonable timeframe of years in order for the exchangers to be able to adjust the volume and money supply they currently have. Otherwise a lot of people will end up burning up graphic cards and all kind of equipment for mining and thousands of BTCs worth nothing.

Another thing that no one thinks about and no one can control - greed.
Most of the bitcoin exchange is done by DIY traders, not miners. When it gets expensive, they sell. Period. They do not care about the whole picture.
If Gox bankrupts it all goes south.

$200 million need federal reserve backing? What are you talking about. There are plenty of companies that have a few Billion USD in liquidity for direct access, and banks.. There are banks that have liquid trillion USD credit lines.

[cr1776]

If prices got that high, I think it more likely that people will be buying and selling fractions of bit coins.  So very few would be buying 1.0 BTC, but many might be buying 0.001 etc.  ;-)

Yes, but in order to facilitate trades, people need to BUY and sell.

And if price skyrockets, I guarantee that people will mostly want to SELL.

Unable to handle those and not having enough cash, all orders past a certain level will be cancelled.

[teodor87]

Again - get real. 1% of the world economy is ~ 300,000,000,000.00USD.

That's 300 billion. The total amount of coins ever is going to be 84 million.

It means that in that rate a coin will be worth ~3571.42$ per coin.

If it goes so high inflation will destroy world's economy. It might go to 1000000$ per coin, then drop to 1000$ because there are no real money to cash you out!

Do you get it or shall I explain in more detail?

Let's get it a bit easier.

I honestly stopped reading the thread after I read to this part.

Firstly, how does 21M btc turn into 84M?

Secondly, those 21,000,000btc have 8 decimal places of fractions behind them making 2.1 quadrillion fractions that can be used for currency.

Let me make this a bit easier for you.

Your math is off. There is not enough currency on the planet to cover 2.1 quadrillion.
Btc for the win.

Yes there is - it's called reality. It's a douche chill. It's even worse. It's not about fractions. It's about greed. That's what you people do not get.

You calculate formulaes and supply and demand, but no one mentions greed. When price skyrockets people sell and the price decreases. Then at a certain point everyone will start selling and there will be problems. That's a guarantee.

[whatisthename]

Again - get real. 1% of the world economy is ~ 300,000,000,000.00USD.

That's 300 billion. The total amount of coins ever is going to be 84 million.

It means that in that rate a coin will be worth ~3571.42$ per coin.

If it goes so high inflation will destroy world's economy. It might go to 1000000$ per coin, then drop to 1000$ because there are no real money to cash you out!

Do you get it or shall I explain in more detail?

Let's get it a bit easier.

If a bitcoin is worth 100$ today, and there are for instance (just an example) 1,000,000 BTC traded every day through MtGox, it means that MtGox needs 100,000,000$ to exchange all these. However if it goes to 200$ for a single day it will need 200,000,000$. Do you really think they have that kind of leverage? Who is their liquidity provider? The Federal Reserve?

If it gets so expensive so fast it will burst. Yes it might increase in value, but it shall happen within reasonable timeframe of years in order for the exchangers to be able to adjust the volume and money supply they currently have. Otherwise a lot of people will end up burning up graphic cards and all kind of equipment for mining and thousands of BTCs worth nothing.

Another thing that no one thinks about and no one can control - greed.
Most of the bitcoin exchange is done by DIY traders, not miners. When it gets expensive, they sell. Period. They do not care about the whole picture.
If Gox bankrupts it all goes south.

What are you talking about?

Why would Mt. Gox need to have $200,000,000 on hand?
It's not up to them to have that liquidity. The people who want to buy the bitcoins are the ones providing the liquidity.
I'm not following your logic.

[teodor87]

My logic is really simple. You said it - "The people who want to buy the bitcoins are the ones providing the liquidity". Sure. But if 70% are selling and 30% are buying do you really think that all positions will be fulfilled?

[agentbluescreen]

Again - get real. 1% of the world economy is ~ 300,000,000,000.00USD.

That's 300 billion. The total amount of coins ever is going to be 84 million.

It means that in that rate a coin will be worth ~3571.42$ per coin.

If it goes so high inflation will destroy world's economy. It might go to 1000000$ per coin, then drop to 1000$ because there are no real money to cash you out!

Do you get it or shall I explain in more detail?

Let's get it a bit easier.

If a bitcoin is worth 100$ today, and there are for instance (just an example) 1,000,000 BTC traded every day through MtGox, it means that MtGox needs 100,000,000$ to exchange all these. However if it goes to 200$ for a single day it will need 200,000,000$. Do you really think they have that kind of leverage? Who is their liquidity provider? The Federal Reserve?

If it gets so expensive so fast it will burst. Yes it might increase in value, but it shall happen within reasonable timeframe of years in order for the exchangers to be able to adjust the volume and money supply they currently have. Otherwise a lot of people will end up burning up graphic cards and all kind of equipment for mining and thousands of BTCs worth nothing.

Another thing that no one thinks about and no one can control - greed.
Most of the bitcoin exchange is done by DIY traders, not miners. When it gets expensive, they sell. Period. They do not care about the whole picture.
If Gox bankrupts it all goes south.

FYI a bitcoin is technically classified as an "over the counter (OTC) derivative" it is NOT a "common nor preferred share" in a business "security" (since it is pure-fiat, unbacked and representative of nothing but itself), nor is it token of a "Future Quantity Buying Contract" for any quantity of commodity, material product or produce. It only "represents" the right to an externally derived future exchange-value of itself accepted between it's counter-parties.

A Bitcoin is a commercial "over the counter (OTC) derivative" of the current price and future possible values of itself and it's network, which are only (at best) commercial resources, and not "commodities". This is why with it's value changing every two seconds it is useless as a "money" because you need an hour to accept and/or spend it. It is really only any good as a delayed-exchange "funding" medium.

Bitcoins and those who trade or exchange it are totally, completely and invincibly "DEREGULATED" in ALL REGARDS save for so called general “safety and soundness” standards (nobody bitches). Bitcoins (a straight-up "confidence gamble")  fall under the blanket gaming "bucket shop" exemptions to the CFMA that were placed there to exempt State casinos and back door "funded credit default swap" (fCDS) instruments (largely used to bid-rig market prices) from any and all regulation, and therefore, what is good for the private bankster goose is great for the public currency gander.

http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000

You see almost every other day either Morgan or Goldman go nearly bankrupt dumping (so-called "naked" shorting) massive gold and silver futures contracts to depress their prices and make practically income-less Bonds and counterfeited FRNs look more attractive. In fact they are never "naked", they just ping-pong the (thus -"funded") "counter-party losses" back and forth (keeping any profits of their own) out their back doors effectively sharing known, prearranged, totally "deregulated" fCDS swapfunds to sustain each of their maximum daily losses.

A Bitcoin functions exactly in much the same way as a CDS. You fund it's former owner's "loss" (costs) on it, and the next owner funds yours.

The supply of Fiat Bitcoins is totally irrelevant and unrelated to their values, and likely to remain so for a long, long time. Small (or even large) quantitative changes in the small intrinsic and utilitarian characteristics of it's values should have practically no impact on it's exchange value, which is solely a "fiat election" of it's futures-market traders (and owner counter-parties) alone.

The (largely utilitarian) demand for Bitcoins is thus far for the most part entirely a function of their intrinsic curiosity, utilitarian novelty and speculative exchange values. Their original purpose was as a gambling casino utility, and they also apparently work pretty well to deal with certain other nastinesses at SR and sports gambling sites.

The best way to think of the exchange-value of Bitcoins is as a kind of a "virtual toilet" which, regardless of what has been dumped through it, only bears the memory-value of the position that it's last user left the seat in, to it's own current owner, alone. The actual "price" (exchange-value) of any given Bitcoin remains forever unknown and unknowable until after it has been re-sold (re-exchange valued) to the next guy, in the future.

At an Exchange, the customers bring all the bitcoins and all the money and then, simply make off with almost all of both in exchanged amounts. Nobody puts any assets of any value into a "Bitcoin Central Reserve-Bank" that then prints up and rents out both original and countless extra counterfeit They-Owe-Us Asset-Receipt Notes to some armed gang of rich political dictators they own and run. (because everybody can't come back for all their assets at once)

People pass their own money around to each other "through" Bitcoins. The number and market-priced fiat value of them are really completely irrelevant. Although it would profit itself and us all much more if it stably went only up at a well controlled and predictable rate and never went down (devalued/inflated).

[agentbluescreen]

My logic is really simple. You said it - "The people who want to buy the bitcoins are the ones providing the liquidity". Sure. But if 70% are selling and 30% are buying do you really think that all positions will be fulfilled?

Go here and look at the green, grey and red "volume bars"

http://www.bitcoincharts.com/charts/mtgoxCAD#rg2ztgCzm1g10zm2g25zvzcv

When Bidders (Buy prices) are meeting sellers Asks (Sell prices) the bar is green (market is at top of or above spread)

When Askers (Sell prices) are meeting buyers Bids (Buy prices) the bar is red (market is at bottom of or below spread)

When Bidders and Askers (Buying and Selling prices) are colliding somewhere in-between the bar is grey (within spread)

A position cannot be executed (fulfilled) outside of this range. (one or the other transacting counter party is not present)


The number of buyers or sellers are irrelevant, only their positions and the weights of their wallets are.


Usually sellers sell at the buy price and buyers buy at the sell price but often the buyers go short and the sellers go long, to "bargain".

Eventually an impatient buyer must go long enough to get a buy or an impatient seller must go short enough to make a sale, especially if a larger quantity is involved.

Otherwise nothing happens

Those two smallish "bridging a spread" labours move the last market price (spread bounds ranges) up or down, but that is not the real problem.

Any larger transactor who must obtain or clear large amounts is always forced to very painfully suffer a much lower or higher than market price, (vaulting the spreads) and the larger the quantities, the bigger those (nasty) spreads get and remain, left behind them.

In fact the critical challenge to Bitcoin transactions other than a stable price, is the actually practical value of liquidity a given transactor can move through an exchange at or around a given price within a practical period of time, which argues for a much, much more highly valued Bitcoin (eg $1,000-$10,000-$100,000), specific pre-determined bid-rung levels about the "current median-basis price" with exponentially higher fee punishments for further out of bounds bids, and for tighter daily transaction frequency limits also punished by exponentially higher fees.

I mean what the hell is the farking ("insufficient funds") added "exchange-value" of a .000001 "millionth" of a lousy $140-something token?

I mean by law in Canada the useless, worthless penny is already legally obsolete, all prices are to be rounded to nickels and banks no longer provide them.

[Jackin Jill]

My logic is really simple. You said it - "The people who want to buy the bitcoins are the ones providing the liquidity". Sure. But if 70% are selling and 30% are buying do you really think that all positions will be fulfilled?

It doesn't matter how many buyers and sellers there are, as long as the commodity quantities match or are similar.

Did you finish high school? These principles are extremely easy to understand.

[rhinospray]

..everything you said...

Brilliant

[teodor87]

My logic is really simple. You said it - "The people who want to buy the bitcoins are the ones providing the liquidity". Sure. But if 70% are selling and 30% are buying do you really think that all positions will be fulfilled?

It doesn't matter how many buyers and sellers there are, as long as the commodity quantities match or are similar.

Did you finish high school? These principles are extremely easy to understand.

When your thoughts form insinde your brain do you bother to stop for a second and realize what they mean?

It's obvious that you're the kind of person which is always in denial. When I said 70% selling and 30% buying I meant orders, not people.

For instance if there are 70000 sell orders for 70,000BTC and 30000 buy orders for 30,000BTC.

If the price increased twice overnight it would be impossible to fill all orders since demand will decrease dramatically.

Only when price drop people will want to sell.

There - pure and simple.