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.