1 BTC = 65000 USD!

[N12]

I’d like to remind people of THE argument to invest in BTC (even with small amounts): Its scarceness in terms of absolute numbers and also relatively, as more and more money will be printed.

The idea is to somehow get an idea what a certain amount of bitcoins WOULD be worth in terms of buying power of the dollar if it were to be replaced completely and immediately. What I thought about was a rather idiotic calculation, but its results are so impressive that you just have to consider them. USD money supply is divided by the money supply of BTC, either the current money supply or if you want to go safe the total (less than 4x higher than current): 2000000000000/21000000=95238.1

That’s right, 95k USD for a single BTC. Multiply that with somewhat less than 4 and you’ll get it for today’s BTC supply. I know that this calculation is nonsense, because firstly, BTC has even more potential than that, as it is supranational andcould replace more than just the USD and secondly, because it expects everyone to switch over immediately and drop the USD.

But why not impress people with the fact that just 1 BTC of investion is going to pay out with at least 95k$ if it happens to be a success. Have you ever seen an investion thatpromising? Just consider the chance that Bitcoin will succeed and outweigh it with the risk of losing x dollars or any amount of any kind of money. You don’t even have to invest by investing money, so EVERY investment that gets you and the community as a whole more BTC is extremely rewarding at this moment.

That’s exactly what I missed when i began reading on Bitcoin: just a simple risk/reward overview. And I’m sure many other people would also be impressed by such numbers.

Update: I think it could be regarded as unserious marketing because it implies that Bitcoin is sort of a pyramid system, which it isn’t. Only investing in Bitcoin is, as it will get less and less profitable over time. I guess that’s the core of it: Breaking the mark where it isn’t profitable anymore, so that there’s no further investment "needed" in order to make BTC more creditable.

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[mpkomara]

$95k * P(BTC replaces USD) <= $1.02   

[N12]

$95k * P(BTC replaces USD) <= $1.02   

You got that wrong. That may be the price, but the buying power would be as high as the factor of said calculation woud be, and that’s what I’m aiming at. I care for what you could BUY with it.

So buying Power simply would be 95k higher if the price is 1:1. Although it’s assumed that the price is 1:0 afterwards, degrading the dollar worthless. I hope people will understand this …

[mpkomara]

P(you know what P means here) < .5

[N12]

Maybe it is. Maybe not. The probability of this doesn’t need to be high, as you can easily invest a small amount like a single dollar to profit a lot.

Also, this calculation was just meant as a kind of orientation for Bitcoin’s potential buying power. If Bitcoin succeeds, you’ll be rich, and that’s the idea of investment in my opinion.

[comboy]

I think it may be worth trying marketing to investors, as an investment with high risk and possible very high returns, but I would vote for some less naive way.

But as it was repeated 100 times here, what we really need are not investors, speculators and miners, but people buying and selling stuff with BTC every day.

[no to the gold cult]

I have a silly calculation too.

If 5 million people took up bitcoin in the next few years, when there are about 10 million bitcoins say, that would be 2 bitcoins for every bitcoin user. Except a few thousand bitcoin users would have much more than 2 bitcoins. This means that in terms of buying power, 1 bitcoin will be quite a fair bit of buynsell, less than the decimal point would be where most business takes place in day to day terms.

Good eh.

By the way, if the bitcoin economy grew to be 1 percent of internet trade, how much money in dollar terms would you say that would represent?

[N12]

Your sarcasm is quite inappropriate, I think. It’s not like I haven’t said it’s merely a hint at how much 1 BTC could be worth if Bitcoin is successful.

Measuring it by internet values would be interesting, but I don't know the internet supply rate (best would be USD, of course) at a given time. Maybe someone can help out on that one and find it though.

[ribuck]

By the way, if the bitcoin economy grew to be 1 percent of internet trade, how much money in dollar terms would you say that would represent?

Here are some US figures from Wikipedia, a few years old, but 1% of that would be one and a half billion dollars:

E-commerce B2C product sales totaled $146.4 billion in the United States in 2006, representing about 6% of retail product sales in the country

For 1% of US internet trade, and with 5 million bitcoins issued, and at their current value of around a dollar, each coin would need to be spent 300 times per year.

[no to the gold cult]

Your sarcasm is quite inappropriate, I think. It’s not like I haven’t said it’s merely a hint at how much 1 BTC could be worth if Bitcoin is successful.

Measuring it by internet values would be interesting, but I don't know the internet supply rate (best would be USD, of course) at a given time. Maybe someone can help out on that one and find it though.

I wasn't being sarcastic, mine really was a silly calculation. I'm not qualified to judge if yours is too, but you seemed to think so. As a conversation starter it's fair enough.


If each bitcoin had to be spent 300 times if equal to 1% of the internet economy (at time of article)... is that like saying 1 bitcoin would be worth 300 dollars? 

[N12]

If that’s the case, i apologize for accusing you. Thought it was a bad joke.
Yeah, your calculation shows what difference investing in BTC, as long as it’s not an established currency, will make.
Basically, INVESTING in BTC (mining or gaining BTC any way) is a bonus pyramid scheme added to the value of the currency itself. When the pyramid scheme becomes unprofitable, BTC should be a widely accepted currency. If this is true, failure seems very unlikely to me.

Thanks to ribuck for at least some value. 300 times BTC per year is a lot, actually, but it’s doable if popularity and especially offered services continue to grow.

I hope this "idea" will somehow strengthen our belief in BTC’s value and help to get more people in.

edit:

If each bitcoin had to be spent 300 times if equal to 1% of the internet economy (at time of article)... is that like saying 1 bitcoin would be worth 300 dollars? 

It’d be like 26,6 according to 146.4m/5.5m at least. I’m confused now because of the 300 times, too.

[ribuck]

If each bitcoin had to be spent 300 times if equal to 1% of the internet economy (at time of article)... is that like saying 1 bitcoin would be worth 300 dollars?  

No. You have to take the velocity of money into account.

Suppose I buy something from Amazon with bitcoins. Amazon then pays their employees with those coins. Those employees buy other stuff with their wages. The same money goes round and round in the economy. This is called the velocity of money.

Based on the 2006 figures that I quoted above, 1% of the US internet economy is around 1.5 billion dollars. If bitcoins were being used for that, it would equal $300 of transactions per bitcoin (1.5 billion divided by 5 million).

If each bitcoin was spent 300 times during the year to support that amount of trade, then each bitcoin would be worth $1. If each bitcoin was spent only 30 times per year, then each bitcoin would be worth $10.

If we look at bitcoinwatch.com we see that over the past 24 hours, 108641 out of 5450000 coins were transacted. That's 2% of all coins changing hands per day, meaning that on average each coin changes hands just over 7 times per year.

But that's not quite the figure we want. It doesn't reflect purchases of tangible goods (it could be just people moving coins from one wallet to another, or back and forth between their wallet and MtGox). Also, it doesn't include people who make purchases using the shopping cart interfaces of MtGox, MyBitcoin, etc. In fact the velocity of money is almost impossible to measure, and most economists don't even try. On the other hand, the value of a bitcoin (or a dollar) is easy to observe, so that's what people measure.

[ribuck]

It’d be like 26,6 according to 146.4m/5.5m at least.

One percent of the 146.4 billion turnover is 1.464 billion, not 146.4 million.

[no to the gold cult]

If each bitcoin had to be spent 300 times if equal to 1% of the internet economy (at time of article)... is that like saying 1 bitcoin would be worth 300 dollars?  

No. You have to take the velocity of money into account.

Suppose I buy something from Amazon with bitcoins. Amazon then pays their employees with those coins. Those employees buy other stuff with their wages. The same money goes round and round in the economy. This is called the velocity of money.

Based on the 2006 figures that I quoted above, 1% of the US internet economy is around 1.5 billion dollars. If bitcoins were being used for that, it would equal $300 of transactions per bitcoin (1.5 billion divided by 5 million).

If each bitcoin was spent 300 times during the year to support that amount of trade, then each bitcoin would be worth $1. If each bitcoin was spent only 30 times per year, then each bitcoin would be worth $10.

If we look at bitcoinwatch.com we see that over the past 24 hours, 108641 out of 5450000 coins were transacted. That's 2% of all coins changing hands per day, meaning that on average each coin changes hands just over 7 times per year.

But that's not quite the figure we want. It doesn't reflect purchases of tangible goods (it could be just people moving coins from one wallet to another, or back and forth between their wallet and MtGox). Also, it doesn't include people who make purchases using the shopping cart interfaces of MtGox, MyBitcoin, etc. In fact the velocity of money is almost impossible to measure, and most economists don't even try. On the other hand, the value of a bitcoin (or a dollar) is easy to observe, so that's what people measure.

Thanks, very enlightening.

I get the impression (based on absolutely no evidense whatsoever) that 1.5 billion dollars in bitcoin trade would mean each bitcoin would be worth between $10 and $20 dollars, not counting demand fr the coins themselves. who knows, $50 per coin maybe? I don't think bitcoin will ever replace 'fiat currency', at least not in the next couple of decades.

Besides, fiat and bitcoin could form a great partnership, bitcoin just being around as an alternative will be good for fiat too. Fiat for finance (the charging of interest etc) and bitcoin for the other stuff.

[marcus_of_augustus]

Besides, fiat and bitcoin could form a great partnership, bitcoin just being around as an alternative will be good for fiat too. Fiat for finance (the charging of interest etc) and bitcoin for the other stuff.

Doesn't seem to work like that, people prefer to hold the best money they can buy, Gresham's law. Quite logical really. The boiled-frog transition from gold to fiat was a hoodwinking for the ages by the banksters over the people. Time some frog-boiling went back the other way.

[ptd]

$95k * P(BTC replaces USD) <= $1.02   

No,

$95k * P(BTC replaces USD) * Time Preference factor <= $1.02

Bitcoin may be worth $95k each in the future, but I want my chicken sandwich, new clothes, education, etc - now!

Also we're assuming a totally free market, which has zero transaction costs. Turning fiat currency into Bitcoin (and vice versa) is both inconvenient and expensive, transaction costs in the economics sense.

[Arsenal]

Why Blitzboom?  I did a similar calculation when I discovered Bitcoins, but never said anything about how valuable Bitcoins will be because I wanted to get mine while the price was low.  It still is, but buying them at $.06 and $.30 was fantastic.  I may buy more, but I'm waiting to see things unfold.  The other reason is because I want BTC to have plenty of time to strengthen before governments attempt to stop it assuming they haven't gone bankrupt yet and assuming they will even have to power to do so.  Egypt's government would have certainly made it difficult for Egyptians to use their BTCs AFAIK.

In response to the criticism of Blitz's original claim I will support his argument.  There is a finite amount of purchasing power that exists.  If infinite purchasing power existed it would have no meaning.  We can't directly measure quantities of purchasing power because it is an idea, but mediums of exchange offer a method of approximating this purchasing power.

Obvious evidence (besides the logical necessity) exists in the fact that when the U.S. gov't increases the quantity of dollars in existence it waters down the value of dollars.  This is because the sum of all dollars (both paper and electronic) represents a fixed quantity of purchasing power (how this amount was achieved is not relevant to my point).  To alter the number of dollars only changes the purchasing power per dollar.  To argue otherwise would be to suggest any government could create purchasing power by printing money, but this would create a situation of infinite purchasing power which negates the idea entirely.

The total amount of purchasing power in the world has been divided and allocated over all human history, across all assets, and in light of all economic events to arrive at the current situation of prices.  Fiat currency systems have a certain amount of this purchasing power.  If an individual sells 10k U.S. dollars today and buys 10k U.S. dollars worth of BTC at the same time then approximately 10k U.S. dollars worth of today's dollar purchasing power moved into BTC and the total purchasing power of the BTN will have gone up by the purchasing power equivalent to 10k U.S. dollars at today's valuation.  The total monetary base of U.S. dollars is ~$2.2 trillion (http://research.stlouisfed.org/fred2/series/BASE).  If all the purchasing power represented by this quantity of money were transferred into 21 million BTCs (and from no source other than this) we would have a BTC value of 2.2x10^12 / 21x10^6 = $104,762 per BTC at today's valuation of the purchasing power of the U.S. dollar (minus a small amount that would occur due to the point at which the value of the dollar equals the value of it as a piece of paper).  It is up to each individual to decide to what extent BTCs will replace or fail to replace other media of exchange to determine his/her appraisal of the final purchasing power of the BTN and individual BTCs.  (Also note that credit contraction would shrink the monetary base if it occurs and government interference in the market would also change the price to some uncertain degree).

[mestar]

If an individual sells 10k U.S. dollars today and buys 10k U.S. dollars worth of BTC at the same time then approximately 10k U.S. dollars worth of today's dollar purchasing power moved into BTC and the total purchasing power of the BTN will have gone up by the purchasing power equivalent to 10k U.S. dollars at today's valuation.

And at the exact moment, the $10.000 dollars also went out of BTC, and we are back to zero. 

When somebody buys BTC, somebody else has to sell them, no new coins are created.

[no to the gold cult]

Besides, fiat and bitcoin could form a great partnership, bitcoin just being around as an alternative will be good for fiat too. Fiat for finance (the charging of interest etc) and bitcoin for the other stuff.

Doesn't seem to work like that, people prefer to hold the best money they can buy, Gresham's law. Quite logical really. The boiled-frog transition from gold to fiat was a hoodwinking for the ages by the banksters over the people. Time some frog-boiling went back the other way.

The thing is I don't think it's wise to hire bitcoins with bitcoins (pay interest on them) but fiat is good for that sort of thing. Because of fundamental differences in the two forms of money, people have even more room to manouver in terms of thinking up crazy money-making schemes, they can skip between inflationary and deflationary / centralized and decentralized models. Eventually fiat could be replaced entirely but that will take a while.

Besides, bitcoins are still mostly a commodity, their transition to being a currency as well (used directly to pay for g&s) is in my opinion a whole other dimension for growth of their value.

[jongameson]

still not a Billionaire.  damn.

should have mined BillionCoin