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Author Topic: What Value do YOU think bitcoins will be worth once all coins are mined?  (Read 2033 times)
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June 24, 2011, 02:28:12 AM
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So if there is only going to be 20 some odd million coins what will they be worth in the end. 100 bucks a coin, 1000, 10,000 a cool mill each? Anyone that knows stocks and how the market works may know the answer to this, I sure would like to know a guesstamate.lol
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usabitcoinbuyer
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June 24, 2011, 04:24:23 AM
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Well, here's my take, and my reasoning for getting into the bitcoin market.  I was actually going to post something of this sort as a reply in one of the "regulated" forums, but since I've been demoted to a n00b, I suppose the contribution here would be beneficial.

There's only going to ever be 21M bitcoins.  I'll ignore the fact someone could attempt to establish a bitcoin competitor.  So, the question then is, how big does one believe the bitcoin economy can be?  $1B?  $10B?  $100B?  I'll pick $10B for the sake of argument.

Looking at the US or Eurozone GDP / money supply estimates as a baseline, one will find that the currency supply (M0) is roughly 15-20% of the GDP.  This implies for a bitcoin economy of $10B, that the total of all bitcoins would be valued around $2B.  If there are at most 21M bitcoins, that implies a bitcoin could be worth about $95 each.

But... In 2013, there will be only half as many bitcoins.  And, due to their nature, some quantity of bitcoins will be lost for posterity due to inadvertently deleted wallet.dat files, etc.  Other bitcoins may be held back from the market for an extended period of time.  So, if the bitcoin economy takes off and hits $10B "GDP" by 2013, it's possible for a bitcoin to be worth $200 at that time, or possibly more.

It's probably way too much to hope for, but I figured I'd swing for the fences.  The US and Eurozone GDPs are ~$15T each.  If the bitcoin can grow to encompass one of those GDPs, that implies a value of around $150k each.

In any case, I decided to buy in for 1/1,000,000th of the bitcoin economy, whatever that will turn out to be Smiley

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June 24, 2011, 02:44:46 PM
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This implies for a bitcoin economy of $10B, that the total of all bitcoins would be valued around $2B.  If there are at most 21M bitcoins, that implies a bitcoin could be worth about $95 each.
This implies that either mining bitcoins decreases dramatically in speed when bitcoins cost $95 to make, or pools will need to share transaction fees with the miners (and fees need to be quite high).

Consider the last 10% of the bitcoins, the difficulty will be so high and the return per mhash so low that it could cost several hundred dollars to mine a block that contains just 0.78 reward in bitcoins.

Also, currently the bitcoin nework uses about $2000/hour in power usage for mining?
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June 24, 2011, 03:38:41 PM
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See my signature for my logic of how to calculate what they will be worth.

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June 24, 2011, 03:59:15 PM
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This implies for a bitcoin economy of $10B, that the total of all bitcoins would be valued around $2B.  If there are at most 21M bitcoins, that implies a bitcoin could be worth about $95 each.
This implies that either mining bitcoins decreases dramatically in speed when bitcoins cost $95 to make, or pools will need to share transaction fees with the miners (and fees need to be quite high).

Consider the last 10% of the bitcoins, the difficulty will be so high and the return per mhash so low that it could cost several hundred dollars to mine a block that contains just 0.78 reward in bitcoins.

Also, currently the bitcoin nework uses about $2000/hour in power usage for mining?
The cost to mine bitcoins is ultimately irrelevant to its market value.  If the value of bitcoins doesn't justify mining for it, people will stop mining.  Suppose it costs me $10,000 to mine an ounce of gold.  Does anyone care?  The current market price is $1500/oz. and that's all I'm going to get for it.  If I don't like it, I shouldn't mine. 


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June 24, 2011, 04:33:52 PM
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Each Bitcoin will have the buying power of between 1 Million and 100Million Dollars does today, why, because Bitcoin is a finite but divisible currency AND it has the potential for complete privacy in financial transactions, for that reason, once the masses understand this, there will be another Gold Rush.
Think of the potential to be able to send your children £20 without requiring a Bank, or Govt, it will be too temptig for businesses too.
Though they may try to fight it, Govt will have to come round to our way of thinking.

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June 24, 2011, 04:41:35 PM
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Looking at the US or Eurozone GDP / money supply estimates as a baseline, one will find that the currency supply (M0) is roughly 15-20% of the GDP.  This implies for a bitcoin economy of $10B, that the total of all bitcoins would be valued around $2B.  If there are at most 21M bitcoins, that implies a bitcoin could be worth about $95 each.

Where do you get your numbers from?

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=BASE

Looks like M0 is almost 3 trillion USD. How do you go from M0, GDP, to the size of bitcoin economy? What's the connection, where's the math?

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June 24, 2011, 05:47:20 PM
 #8

So if there is only going to be 20 some odd million coins what will they be worth in the end. 100 bucks a coin, 1000, 10,000 a cool mill each? Anyone that knows stocks and how the market works may know the answer to this, I sure would like to know a guesstamate.lol

There are a lot of variables still, wide acceptability, easy of use, shrink (number of bitcoins lost forever)...

If BTC can find its place limits look good.  I am still concerned about easy of use.   
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June 24, 2011, 06:12:50 PM
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Anyone that knows stocks and how the market works may know the answer to this, I sure would like to know a guesstamate.lol
The standard answer is that the most probable future value is todays value (efficient market hypothesis). However the market for Bitcoins is somewhat illiquid, and the EMH is controversial, anyway.
In Bitcoins case the random variable dominating all others is future adoption.
Current market prices imply lots of future growth, I would say about 100x. If people believe this growth will not be realized, prices will fall and if it looks like this growth will be exceeded, prices will rise.
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June 25, 2011, 04:18:17 AM
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Looking at the US or Eurozone GDP / money supply estimates as a baseline, one will find that the currency supply (M0) is roughly 15-20% of the GDP.  This implies for a bitcoin economy of $10B, that the total of all bitcoins would be valued around $2B.  If there are at most 21M bitcoins, that implies a bitcoin could be worth about $95 each.

Where do you get your numbers from?

http://research.stlouisfed.org/fred2/graph/fredgraph.png?&id=BASE

Looks like M0 is almost 3 trillion USD. How do you go from M0, GDP, to the size of bitcoin economy? What's the connection, where's the math?

From http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal), US GDP =~ $14T, Eurozone GDP =~$17T.
From http://en.wikipedia.org/wiki/Money_supply, US monetary base =~ $2.0T, Eurozone M1 =~ 3B Euro.

This leads to my rough estimate of M0 =~ 0.15 GDP.  Why am I making that comparison?  It's the best way I can think of to compare the size of an economy (GDP) to the amount of currency needed to support it.  I'm assuming that bitcoins are analogous to physical currency.  Note that this comparison could be argued to be an underestimate, as both the dollar and euro are subject to fractional reserve lending.  It's not clear if bitcoins will develop such a market. 

As for the $10B number, I pulled that out of thin air.  It's hard to say how big the bitcoin economy will be.  It would be nice to think it could eventually grow to a sizable fraction of the dollar or euro, but perhaps more realistic is the size of an economy such as Jamaica or Iceland (which is ~$10B, per GDP page above).

It may be just as arbitrary as the poster who says that a bitcoin will someday represent $1M (though if you use my M0/GDP metric, that would require the bitcoin to take over the entire world economy).  However, valuation estimates have to start from somewhere, so basically, my estimate is that the value of one bitcoin =~ 0.15 * size of bitcoin economy / total # of bitcoins in circulation.

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June 27, 2011, 04:08:42 AM
 #11

: As for the $10B number, I pulled that
: out of thin air.  It's hard to say how big
: the bitcoin economy will be.

Why not consider the aspects of tthe economic where bitcoin adds most value... global black market, online payment, wire transfers, funding revolutions...

I believe its well in the trillions as bitcoins will be convertible to "the next new thing".

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June 27, 2011, 04:24:26 AM
 #12

The cost to mine bitcoins is ultimately irrelevant to its market value.  If the value of bitcoins doesn't justify mining for it, people will stop mining.  Suppose it costs me $10,000 to mine an ounce of gold.  Does anyone care?  The current market price is $1500/oz. and that's all I'm going to get for it.  If I don't like it, I shouldn't mine. 

If you are spending $10,000/oz to mine gold that you can sell at $1500/oz, you won't be in business very long.

The cost to mine bitcoins is irrelevant to amateur miners, but to professionals it is very important.The difficulty is going to go up for at least two more weeks, and unless the price of bitcoins follows, professionals are going to start shutting down because it isn't profitable. I predict we will see a difficulty decrease before the end of the summer.


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July 01, 2011, 05:29:47 AM
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The cost to mine bitcoins is ultimately irrelevant to its market value.  If the value of bitcoins doesn't justify mining for it, people will stop mining.  Suppose it costs me $10,000 to mine an ounce of gold.  Does anyone care?  The current market price is $1500/oz. and that's all I'm going to get for it.  If I don't like it, I shouldn't mine. 

If you are spending $10,000/oz to mine gold that you can sell at $1500/oz, you won't be in business very long.

The cost to mine bitcoins is irrelevant to amateur miners, but to professionals it is very important.The difficulty is going to go up for at least two more weeks, and unless the price of bitcoins follows, professionals are going to start shutting down because it isn't profitable. I predict we will see a difficulty decrease before the end of the summer.


I think we're saying the same thing.  The cost to mine is important for professionals to stay in the game, but doesn't drive pricing.  A bitcoin miner can't force the market to buy at his (higher than market) production cost.  Ultimately demand has to drive pricing to make mining at a particular difficulty profitable.

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July 01, 2011, 06:14:22 AM
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Probably $0.00 - $100.00
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July 01, 2011, 06:42:06 AM
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The cost to mine bitcoins is ultimately irrelevant to its market value.  If the value of bitcoins doesn't justify mining for it, people will stop mining.  Suppose it costs me $10,000 to mine an ounce of gold.  Does anyone care?  The current market price is $1500/oz. and that's all I'm going to get for it.  If I don't like it, I shouldn't mine. 

If you are spending $10,000/oz to mine gold that you can sell at $1500/oz, you won't be in business very long.

The cost to mine bitcoins is irrelevant to amateur miners, but to professionals it is very important.The difficulty is going to go up for at least two more weeks, and unless the price of bitcoins follows, professionals are going to start shutting down because it isn't profitable. I predict we will see a difficulty decrease before the end of the summer.


I think we're saying the same thing.  The cost to mine is important for professionals to stay in the game, but doesn't drive pricing.  A bitcoin miner can't force the market to buy at his (higher than market) production cost.  Ultimately demand has to drive pricing to make mining at a particular difficulty profitable.


It definitely seems like the price to mine will be a big decision-maker.

We know that technology is speeding up very rapidly, so that means it will be cheaper to mine in the future.
BUT
It will continually get more difficult to mine, thus requiring more money to do the mining, so you can take away the savings you have because of advancing technology.
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July 01, 2011, 06:53:51 AM
 #16

I don't have any yet but i intend to buy half a dozen or so just in case they go crazy and are worth several thousand or millon each in future years.  i'll just sit on them.  if they crash i dont really care as its a speculative game.

also, with only 21 million of them available, not everybody in the world will be able to have one.  Hell not eveyone in Australia will be able to have one!  they will be very very scarce.

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July 01, 2011, 07:24:39 AM
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I don't have any yet but i intend to buy half a dozen or so just in case they go crazy and are worth several thousand or millon each in future years.  i'll just sit on them.  if they crash i dont really care as its a speculative game.

also, with only 21 million of them available, not everybody in the world will be able to have one.  Hell not eveyone in Australia will be able to have one!  they will be very very scarce.

Yes, the future if bitcoin is speculative. I only wish I had sent a ten-dollar bill to that one guy who wanted to sell me 9.9 BTC back in March. I thought it was risky sending cash through the mail. I forgot about bitcoins until early June, when I read about them again online.

Now I'm a little miner at 500mhps and I have purchased 8 coins at $16, and have mined 2 coins so far in 10 days.

Back on topic, I think the market will determine the value.  I hope that all exchanges will have "dark pools" as to not drive the market when moving thousands of coins on it.

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July 01, 2011, 08:06:33 AM
 #18

also, with only 21 million of them available, not everybody in the world will be able to have one.  Hell not eveyone in Australia will be able to have one!  they will be very very scarce.

True, but not everybody in the world has $1 million either.

However, let's not forget bitcoin is highly divisible. If it did ever get to being worth $1m, and you had only 0.01349895 BTC, moving the decimal point six places to the right, that'd be equal to $13,498.95. Of course, a loaf of bread might very well be selling for $1,000 then...

So yes, bitcents/millicents would be far more readily available than a whole bit and it might very well that a vast majority of people will never ever see a full bitcoin. But with a limit on the amount of deflationary currency in circulation (21 million BTC), at least the price of things might be affordable for most, if not all.

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July 01, 2011, 09:22:04 AM
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My opinion is its going to be directly proportional to the number of vendors/exchangers, ... So it could be as low as half a penny/cent, but if successful, possibly $1000-$100,000 each...

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July 01, 2011, 09:28:57 AM
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This implies that either mining bitcoins decreases dramatically in speed when bitcoins cost $95 to make, or pools will need to share transaction fees with the miners (and fees need to be quite high).

Consider the last 10% of the bitcoins, the difficulty will be so high and the return per mhash so low that it could cost several hundred dollars to mine a block that contains just 0.78 reward in bitcoins.

Also, currently the bitcoin nework uses about $2000/hour in power usage for mining?
Nobody goes to that restaurant, it's too crowded.

If nobody is bothering to mine, then the difficulty will drop and it will be very easy to mine.

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