Bitcoin potential value

[markm]

And yet the current value of bitcoin certainly isn't $53.92 USD per BTC.

Actually it is even more than that, but people are stupidly throwing them away for under ten bucks. There's just no accounting for people I guess.

-MarkM-

[FreeMoney]

And yet the current value of bitcoin certainly isn't $53.92 USD per BTC.

Actually it is even more than that, but people are stupidly throwing them away for under ten bucks. There's just no accounting for people I guess.

-MarkM-

Close enough? :-)

[bpd]

These calculations are thanks to Arthur Britto:


Amazon
Amazon grosses $38 billion per year.  Assuming a 3% transaction fee, Amazon pays $1 billion a year in transactions fees.  Amazon nets $1 billion per year.  Amazon could double their profits by doing all transactions in Bitcoin.  If the market cap for bitcoin was $38 billion, each bitcoin would be worth $5,400.

Gambling
The online poker market is $4.8 billion a year industry. Online gambling will follow poker and is a $30 billion a year industry  If the market cap for bitcoin was $30 billion, each bitcoin would be worth $4,300.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1747646

Gas stations
Credit card companies charge gas stations a 2% transaction fee.  By eliminating credit card transaction fees, gas station owners could double their profits. The US consumes 65 billion gallons of gasoline per year.  At $3.60 per gallon, this could be a $234 billion dollars going through the bitcoin economy's per year. If the market cap for bitcoin was $234 billion, each bitcoin would be worth $34,400 dollars.


International Remittance
International remittance is the transfer of money by a foreign worker to their home country.  In 2007, remittance worldwide transferred $300 billion dollars.  Western Union fees for remittance can run from about 4 percent to 20 percent or more.  If the market cap for Bitcoin was $300 billion, each bitcoin would be worth $42,000.

These estimates equate transaction volume with the total value of outstanding bitcoin, which is incorrect. The missing factor is velocity of money, I.e. the rate at which it flows. The same money can take part in multiple transactions over a given timeframe. Specifically, V is defined as T/M where T is the nominal transaction volume over a given period, and M is the monetary base. For example, the current velocity of US dollar M1 is about 7, measured on a quarterly basis (http://research.stlouisfed.org/fred2/series/M1V). This means the entire monetary base of M1 turns over 7 times a quarter or 28 times a year. It's hard to estimate velocity of bitcoin very accurately, but based on blockchain.info estimated daily transaction vol of 229,000 on a base of 9M, that gives V=2.3 on a quarterly basis, or 9.2 on a yearly basis. It's hard to know how v will change in the future, but based on the current velocity, Arthur's estimates for bitcoin market cap are probably too high by a factor of 10 or so (with a large margin of error, however). Note that if more bitcoin is hoarded, then the portion that is used transactionally either must move faster, or the value must be higher to support a given level of commerce.

[mystery2048]

As with everything in life, nobody will truely know the value of bitcoins (or whatever) until there is a shortage of it...

[tvbcof]

And yet the current value of bitcoin certainly isn't $53.92 USD per BTC.

Actually it is even more than that, but people are stupidly throwing them away for under ten bucks. There's just no accounting for people I guess.

-MarkM-

I would not rule it out (nor would I count on it or even consider very probable even.)  If people want something badly enough and it is in short supply the price can get very high, and there are plausible scenarios which could make secret keys in the block chain be in very high demand.  My rough estimate of 'parity' is 1BTC/Kg gold.

[istar]

You want the secret...They real truth. Noone will ever be able to buy all the 21 million coins at any price.

There will only circulate at max half of all the coins on the market.
The rest will be in savings.

So when you calculate the price. It cant be calculated on all the 21 million coins.

As the price goes higher, there will allways be someone who keeps his coins wanting more.
As the price crashes, there will allways be people who do not want or have to sell at to low.

Even if Bitcoin dies, not everyone will sell. Since there will be some people who will try to turn the network on again.

Ofcourse that means that someone also would be willing to buy for a higher price.
But as price could allways rise it will allways be a good investment.

And there will allways be some of the last guys that just bought will not sell at a loss.

They can make Bitcoin illegal but not all over the world.

[mystery2048]

Its not just that, there will be way less than 21 million bitcoins for many reasons.

1) Alot of wallets have been lost, stolen or hacked, on purpose or by accident

2) Satoshi mined a huge load of coins when bitcoin started, and its unclear whether he will ever be back to spend them

3) Alot of people through laziness have lost coins mined in the early days

4) Its very easy to lose coins, especailly if you have encrypted/hidden them, if you happen to be die for example, your coins are gone in this case

5) Random computer crashes, your house being burgled, or fires can destroy bitcoins if you havent backed them up

6) Sudden amnesia can cause bitcoins to be lost

7) Any of a dozen unlikely possibilities can also cause coins to be lost

Ie, very few people will ultimately secure their coins properly, and those that do, may simply get hit by a bus tommorow. Therefore, over the next 10 years, most coins will disappear into oblivion... This means deflation, but it also means the remaining coins will be much much valuable as there will be no where near 21 million coins that are actively usable/traded....

[kangasbros]

These calculations are thanks to Arthur Britto:


Amazon
Amazon grosses $38 billion per year.  Assuming a 3% transaction fee, Amazon pays $1 billion a year in transactions fees.  Amazon nets $1 billion per year.  Amazon could double their profits by doing all transactions in Bitcoin.  If the market cap for bitcoin was $38 billion, each bitcoin would be worth $5,400.

Gambling
The online poker market is $4.8 billion a year industry. Online gambling will follow poker and is a $30 billion a year industry  If the market cap for bitcoin was $30 billion, each bitcoin would be worth $4,300.
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1747646

Gas stations
Credit card companies charge gas stations a 2% transaction fee.  By eliminating credit card transaction fees, gas station owners could double their profits. The US consumes 65 billion gallons of gasoline per year.  At $3.60 per gallon, this could be a $234 billion dollars going through the bitcoin economy's per year. If the market cap for bitcoin was $234 billion, each bitcoin would be worth $34,400 dollars.


International Remittance
International remittance is the transfer of money by a foreign worker to their home country.  In 2007, remittance worldwide transferred $300 billion dollars.  Western Union fees for remittance can run from about 4 percent to 20 percent or more.  If the market cap for Bitcoin was $300 billion, each bitcoin would be worth $42,000.

As I understand, if we say "industry X is Y billion dollar industry" we mean the annual revenue of that industry. Comparing this number to bitcoin market cap doesn't make much sense. More sensible comparison could perhaps be the annual volume of bitcoin exchanges together.

[tvbcof]

You want the secret...They real truth. Noone will ever be able to buy all the 21 million coins at any price.
...

Even if Bitcoin dies, not everyone will sell. Since there will be some people who will try to turn the network on again.

...

Or choose the existing 'Satoshi' block chain as the basis for a variety of projects which might make use of such a creation.  Someone fortunate enough to control small chunks of it could find themselves in a position to 'sell' the same real estate multiple times.  They also might not of course.

[dacoinminster]

Sorry, I can't let this thread pass without posting this very relevant infographic.

Here's why bitcoin price increases are just getting started:


img6.imageshack.us/img6/7319/028trillions.png

The infographic is part of a larger presentation on the potential of bitcoin which I made.

[Fuckbuddies]

Here a small calculation to estimate the maximum potential value of one single bitcoin if all the world economy turns to be in bitcoin.

Total world economy actually in USD ~= 32 120 264 000 000 000 $
Max bitcoin in circulation (considering that no bitcoins have been lost) = 21 000 000

32 120 264 000 000 000$ / 21 000 000 BTC = 1 529 536 380$ per bitcoin. 

That would be great   

World economy in USD is $32,120,264,000,000,000???

I think you added two or three zeroes by accident.

WTF is that number?

[evoorhees]

As with everything in life, nobody will truely know the value of bitcoins (or whatever) until there is a shortage of it...

As with everything in life, there is never a shortage if prices are not fixed.

(caveat - short term shortages can and do happen all the time, but long term shortages are impossible if prices are free to move)

[lordcirth]

If bitcoin was used for every single trade made by every single person on the planet, the system would collapse in about 0.5 seconds... The internet would probably also collapse... We would probably need much more capacity, hard drives would be too small, processing power too slow, and we would need like a few hundred different crypto currencies...

Click Here

Remember, the Electrum thin client only prevents the need for the hard drive space, but it doesn't reduce the network load at all. Besides, that would lead to dangerous centralization.

[tvbcof]

If bitcoin was used for every single trade made by every single person on the planet, the system would collapse in about 0.5 seconds... The internet would probably also collapse... We would probably need much more capacity, hard drives would be too small, processing power too slow, and we would need like a few hundred different crypto currencies...

I see more advantages than disadvantages to having multiple crypto-currencies.  Chief among the advantages would have to do with scaling, but it would bring a level of competition and evolution which tends to be beneficial to end-users.  If most of them shared Bitcoin's 'low viscosity', end-users should enjoy reasonably priced and effective exchanges between them.

Click Here

Cute

Remember, the Electrum thin client only prevents the need for the hard drive space, but it doesn't reduce the network load at all. Besides, that would lead to dangerous centralization.

Doesn't seem that you've been at this very long based on your posting record.  If so, I'll write it off to the 'fresh set of eyes seeing things more clearly' principle.