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 Author Topic: Fun Calculation For The Day  (Read 2736 times)
Trader Steve
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 July 09, 2011, 12:09:18 PM

Here's a fun calculation: There are 166,000 tonnes of gold in the world (source: World Gold Council). Each tonne consists of 32,150 troy ounces for a total of 5,336,900,000 ounces. Divide that amount by the eventual total number of bitcoin (21,000,000) and you get 254 ounces of gold per bitcoin. With gold at a US dollar value of \$1,600 that would equate to \$406,400 per bitcoin.

32150 x 166000 = 5,336,900,000 oz / 21,000,000 = 254 oz per 1 BTC or 254 x \$1,600 gold = \$406,400 per BTC

Do I think a bitcoin will eventually be worth \$406, 400? I have no idea... What do you think?
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wareen
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Revolutionizing Brokerage of Personal Data

 July 09, 2011, 12:40:18 PM

Most probably not - as with Bitcoin's intrinsic value due to the properties making it suitable for online transactions, gold has intrinsic value due to its perceived beauty and its industrial applications. Therefore neither gold nor Bitcoin will drop to zero for the foreseeable future and they also won't replace each other fully, as your calculation seems to imply.

But if Bitcoin ever reaches a mainstream reputation similar to gold regarding its usefulness as a store of value, we can probably expect price increases at the cost of the gold price.

 ▄▄▀▀▄▄    ▄▄▀▀▄▄██▄▄▀▀▄▄▄▄▀▀▄▄█████▄████▄▄▀▀▄▄█ █▀▀█▄█████████████ ██ █▄▄████▀   ▀██████ ██ ███████     █▄████ ██ █████▀█▄   ▄██████ ██ █▄█████▌   ▐██████ ██ █████▀█     ██████ ██ ██▄███████████████ █▀▀▄▄▀▀█████▀████▀▀▄▄▀▀    ▀▀▄▄▀▀██▀▀▄▄▀▀        ▀▀▄▄▀▀ .PDATA...TOKEN.. ██████   ████   ████   ████   ████   ████   ████   ████   ████   ██████ ██████  ████  ████  ████  ████  ████  ████  ████  ████  ██████ ██████   ████   ████   ████   ████   ████   ████   ████   ████   ██████ TELEGRAM     BITCOINTALK     FACEBOOKMEDIUM    SLACK    TWITTER    YOUTUBE▬▬▬▬▬▬▬   E M A I L   ▬▬▬▬▬▬▬ ██████  ████  ████  ████  ████  ████  ████  ████  ████  ██████ PRE-SALE     [ April 10th ]
Steve
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 July 09, 2011, 12:50:26 PM

Here's a fun calculation: There are 166,000 tonnes of gold in the world (source: World Gold Council). Each tonne consists of 32,150 troy ounces for a total of 5,336,900,000 ounces. Divide that amount by the eventual total number of bitcoin (21,000,000) and you get 254 ounces of gold per bitcoin. With gold at a US dollar value of \$1,600 that would equate to \$406,400 per bitcoin.

32150 x 166000 = 5,336,900,000 oz / 21,000,000 = 254 oz per 1 BTC or 254 x \$1,600 gold = \$406,400 per BTC

Do I think a bitcoin will eventually be worth \$406, 400? I have no idea... What do you think?
This calculation implies bitcoin completely replacing gold.  I think that's unlikely.  However, bitcoin will take market share from gold and other forms of money.  And it will eventually be valued higher than gold due to its utility for commerce, it's decentralized nature, and its secure design (assuming we don't find any fatal technical flaws).  So, I like to think in terms of bitcoin reaching parity with gold, which would put its value at half the figure you came up with (or ~\$200,000/btc).  But I think it will take at least 10 years to get there.

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Trader Steve
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"How do you eat an elephant? One bit at a time..."

 July 09, 2011, 01:00:52 PM

Here's a fun calculation: There are 166,000 tonnes of gold in the world (source: World Gold Council). Each tonne consists of 32,150 troy ounces for a total of 5,336,900,000 ounces. Divide that amount by the eventual total number of bitcoin (21,000,000) and you get 254 ounces of gold per bitcoin. With gold at a US dollar value of \$1,600 that would equate to \$406,400 per bitcoin.

32150 x 166000 = 5,336,900,000 oz / 21,000,000 = 254 oz per 1 BTC or 254 x \$1,600 gold = \$406,400 per BTC

Do I think a bitcoin will eventually be worth \$406, 400? I have no idea... What do you think?
This calculation implies bitcoin completely replacing gold.  I think that's unlikely.  However, bitcoin will take market share from gold and other forms of money.  And it will eventually be valued higher than gold due to its utility for commerce, it's decentralized nature, and its secure design (assuming we don't find any fatal technical flaws).  So, I like to think in terms of bitcoin reaching parity with gold, which would put its value at half the figure you came up with (or ~\$200,000/btc).  But I think it will take at least 10 years to get there.

My thoughts exactly.
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 July 09, 2011, 04:06:32 PM

Why do you guys assume that the value of gold will stay at \$1500/ounce? Bitcoin could easily exceed \$10mio if the USD lost its global credibility.

Whether or not it ever reaches market share parity with gold is another issue... who knows. Perhaps one day the digitial nature will be seen as a boon rather than bane.
Trader Steve
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"How do you eat an elephant? One bit at a time..."

 July 09, 2011, 04:39:09 PM

Why do you guys assume that the value of gold will stay at \$1500/ounce? Bitcoin could easily exceed \$10mio if the USD lost its global credibility.

Whether or not it ever reaches market share parity with gold is another issue... who knows. Perhaps one day the digitial nature will be seen as a boon rather than bane.

No assumption here. I'm certain the money-printing will continue and these calculations could very well be understated!
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 July 09, 2011, 04:43:12 PM

You all had some education at some point.  Did you skip out on critical thinking class?  You think it's reasonable for bitcoins to reach \$200,000 each in ten years?

Trader Steve
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"How do you eat an elephant? One bit at a time..."

 July 09, 2011, 05:05:05 PM

You all had some education at some point.  Did you skip out on critical thinking class?  You think it's reasonable for bitcoins to reach \$200,000 each in ten years?

Why not?
wareen
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 July 09, 2011, 05:16:56 PM

Well, we already witnessed 100-fold increases within 7 months - would it have been reasonable to predict that back then?
Nobody knows the future - we can only try to make good use of the historical data we have and of the mechanisms we believe to be at work for the future.

And yes, it is of course reasonable to assign a non-zero probability for a 200,000 USD Bitcoin in ten years. Same goes for all other values of course...

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 July 09, 2011, 05:19:40 PM

Well, we already witnessed 100-fold increases within 7 months - would it have been reasonable to predict that back then?
Nobody knows the future - we can only try to make good use of the historical data we have and of the mechanisms we believe to be at work for the future.

And yes, it is of course reasonable to assign a non-zero probability for a 200,000 USD Bitcoin in ten years. Same goes for all other values of course...
0% probability for bitcoin value to fall under 0 USD. :p

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wareen
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 July 09, 2011, 05:28:44 PM

0% probability for bitcoin value to fall under 0 USD. :p
Oh what limited imagination you have
But I'll give you that - I think we can round those cases to 0%

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 July 09, 2011, 05:33:42 PM

You all had some education at some point.  Did you skip out on critical thinking class?  You think it's reasonable for bitcoins to reach \$200,000 each in ten years?
They are dreaming to get rich

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 July 09, 2011, 05:39:54 PM

And yes, it is of course reasonable to assign a non-zero probability for a 200,000 USD Bitcoin in ten years. Same goes for all other values of course...

Do you think he was talking about non-zero probability when he said:

"So, I like to think in terms of bitcoin reaching parity with gold, which would put its value at half the figure you came up with (or ~\$200,000/btc).  But I think it will take at least 10 years to get there."

And then someone else jumped in to say that value might be understated?  I think we're talking about what's realistic and probable, not what's not-impossible.

molecular
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 July 09, 2011, 05:42:39 PM

Here's a fun calculation: There are 166,000 tonnes of gold in the world (source: World Gold Council). Each tonne consists of 32,150 troy ounces for a total of 5,336,900,000 ounces. Divide that amount by the eventual total number of bitcoin (21,000,000) and you get 254 ounces of gold per bitcoin. With gold at a US dollar value of \$1,600 that would equate to \$406,400 per bitcoin.

32150 x 166000 = 5,336,900,000 oz / 21,000,000 = 254 oz per 1 BTC or 254 x \$1,600 gold = \$406,400 per BTC

Do I think a bitcoin will eventually be worth \$406, 400? I have no idea... What do you think?

It might happen that bitcoin grabs quite a share from gold as globally accepted store of value, but at that time, I predict we won't be measuring it's value in \$. We would generally measure value of stuff in BTC.

So when will 1 BTC equal one BTC?

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 July 09, 2011, 05:44:37 PM

So when will 1 BTC equal one BTC?

Shortly after the world finally realizes that credit cards should be abolished for the good of society.

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CurbsideProphet
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 July 09, 2011, 05:45:30 PM

Here's a fun calculation: There are 166,000 tonnes of gold in the world (source: World Gold Council). Each tonne consists of 32,150 troy ounces for a total of 5,336,900,000 ounces. Divide that amount by the eventual total number of bitcoin (21,000,000) and you get 254 ounces of gold per bitcoin. With gold at a US dollar value of \$1,600 that would equate to \$406,400 per bitcoin.

32150 x 166000 = 5,336,900,000 oz / 21,000,000 = 254 oz per 1 BTC or 254 x \$1,600 gold = \$406,400 per BTC

Do I think a bitcoin will eventually be worth \$406, 400? I have no idea... What do you think?

Isn't Bitcoin supposed to be a next gen currency?  I'm not understanding why it's being compared to a commodity.  And specifically, gold.  Why not silver?  Or copper?  All which have real world uses and thousands of years of history as a store of value.

Believing one Bitcoin will be at parity with 254 ounces of gold is beyond delusional.

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 July 09, 2011, 05:45:31 PM

You all had some education at some point.  Did you skip out on critical thinking class?  You think it's reasonable for bitcoins to reach \$200,000 each in ten years?
They are dreaming to get rich

everytime i look at your name i see "groinkoin".   must be my twisted nature.

anyways its doesn't hurt to dream!
molecular
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 July 09, 2011, 05:51:27 PM

You all had some education at some point.  Did you skip out on critical thinking class?  You think it's reasonable for bitcoins to reach \$200,000 each in ten years?

Do you think it's reasonable for the earth to be spherical? Do you really think humans could survive travelling at speed greater than 30 kilometers per hour? Do you think it's reasonable for information to travel through air without a wire?

I'm not saying it will happen, but man, if you see no possibility that it might, you seriously lack some imagination. Did your mother not tell you about having dreams? Or maybe hollywood?

p(btc >= 200,000\$) > p(btc == 0\$), I would say

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wareen
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 July 09, 2011, 06:19:49 PM

I think we're talking about what's realistic and probable, not what's not-impossible.
People do tend to overestimate the probability of some very rare events (that's why they play the lottery) but then again, market prices often reflects psychology as well, so - who knows...

I was just pointing out that your claim of some estimation being "unreasonable" is as hard to justify as everyone's else. Nobody knows the future, but if you already experienced a very rare event (dramatic price increase in short time) it is at least reasonable to think about possible underlying mechanisms which might have made the event not so improbable as you initially thought it to be.

Anyway, I personally don't think Bitcoin will ever be valued that high.

p(btc >= 200,000\$) > p(btc == 0\$), I would say
Finally we're talking numbers

 ▄▄▀▀▄▄    ▄▄▀▀▄▄██▄▄▀▀▄▄▄▄▀▀▄▄█████▄████▄▄▀▀▄▄█ █▀▀█▄█████████████ ██ █▄▄████▀   ▀██████ ██ ███████     █▄████ ██ █████▀█▄   ▄██████ ██ █▄█████▌   ▐██████ ██ █████▀█     ██████ ██ ██▄███████████████ █▀▀▄▄▀▀█████▀████▀▀▄▄▀▀    ▀▀▄▄▀▀██▀▀▄▄▀▀        ▀▀▄▄▀▀ .PDATA...TOKEN.. ██████   ████   ████   ████   ████   ████   ████   ████   ████   ██████ ██████  ████  ████  ████  ████  ████  ████  ████  ████  ██████ ██████   ████   ████   ████   ████   ████   ████   ████   ████   ██████ TELEGRAM     BITCOINTALK     FACEBOOKMEDIUM    SLACK    TWITTER    YOUTUBE▬▬▬▬▬▬▬   E M A I L   ▬▬▬▬▬▬▬ ██████  ████  ████  ████  ████  ████  ████  ████  ████  ██████ PRE-SALE     [ April 10th ]
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 July 09, 2011, 06:22:49 PM

So the price of gold is completely based on how much there is?

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