The Target Value For Bitcoin Is Not Some $50 Or $100. It Is $100,000 To $1,000,000.
Bitcoin’s value is at an all-time high again. Following the hype peak and crash in 2011, many seemed to have thought it was just another dotcom fluke. But bitcoin was much more than that, and it has returned with a vengeance – its market cap is now twice what it was in the 2011 peak, and it is nowhere near its potential, which is four orders of magnitude above today’s value.
In this, a lot of people are confused at the fact that bitcoin has climbed 200% since the start of this year alone, and wonder what to make of it. It is currently at $41.50 and climbing fast, and I see a lot of people just looking at the numbers and guessing from charts how things will pan out.
I am seeing guesses of $50, $100, $150, even $1,000. These numbers seem pulled out of thin air from just looking at the charts – nobody seems to have done due diligence from the other direction, from the most fundamental observation of all:
Bitcoin is a transactional currency. As such, it is competing for market share on the transactional currency market.
Talking about bitcoin value is not about happily watching numbers go up and down while having popcorn. This is about identifying a global market, looking at its size and estimating a target market share based on the strengths and weaknesses of the competing product or service under analysis.
When you know the size of the target market, and have an estimate for your projected market share, you can estimate the value of your product or service as a percentage of the value of the total market. I haven’t seen anybody do that for bitcoin.
The total size of the transactional currency market is hard to estimate, but has been pegged at about $60 trillion (the amount of money in circulation worldwide). Seeing how this number is roughly on par with the world’s GDP, it is a reasonable enough number to be in the right ballpark. Based on my four earlier estimates (one, two, three, four), I think it is reasonable that bitcoin captures a 1% to 10% market share of this market.
The low end of 1% would be if it captures international and internet trade. The 10% would be if bitcoin also manages to capture some brick-and-mortar retail trade, which we are already seeing strong signs that it might – operations provide a 3% to 5% extra profit margin on sales when you can cut out the credit card processors, so the incentive to switch is immense: those 3% to 5% cost savings translate to 50% to 100% increased profits, as margins are typically very slim in retail.
Furthermore, some people will undoubtedly invest in bitcoin and keep their portion of bitcoin away from the transactional pool, like all people tend to hoard money if they are able. This decreases the amount of bitcoin that must fulfill the market share, further driving up value for each individual bitcoin. As a rough estimate, let’s assume that only one in four bitcoins is actually used in transactions, and the rest are in some kind of savings or investment plans.
This leads us to a target market cap of 600 billion to 6 trillion USD, to be fulfilled by about 6 million bitcoin, which makes for easy calculations. That means that each bitcoin would be worth $100,000 at the low market cap and $1,000,000 at the high market cap.
In the light of this, present-day projections of $100 that present themselves as “daring and optimistic” actually come across as rather shortsighted and almost dealing with peanuts.
So is the projected market share realistic? Bitcoin certainly has hurdles to overcome – scalability and usability being two of them – but it has done remarkably well in maturing in the two years since I started looking at it. My prediction of a mainstream breakthrough around the year 2019 remains, and it still depends on getting mainstream usability; a target market cap may be reached about a decade after that happens, as a technology typically takes ten years from mainstream breakthrough to maturity.
Now, there are definitely uncertainties in this projection and its assumptions – but it does indicate what kind of ballpark we are talking about.
DISCLOSURE
The author has a significant investment in bitcoin. Specifically, he went all-in two years ago after having run these very numbers.
this "guy" must be rich as hell
Edited by Crow ()
swampman posted:ok then, so what should i be doing with my money? please do not say invest it in Bitcoins. I will not be responding to people who tell me to do something ludicrous and obviously stupid with it like shoving it up my ass or giving it to you. People who expect me to do something "ethical" with it are also barging up the wrong tree. Your silly little ideas of good and evil are transparently obtuse. Visit http://atheistanon.proboards.com/index.cgi to learn more. You know I honestly don't know why you trolls bother. You sit around all day trying to get a rise out of people, because you have no jobs, no respect, and now, no discipline. Fuck along and die now.
Discipline come back
swampman posted:whats the smart place for me to put my money. should i take out a loan and buy a houseboat. or what. maybe... buy 20 sewing machines? bicycle powered crop grower? sunscreen with some fuckoff spf rating that wraps around the side of the bottle?
"Cash out your entire savings account in pennies. Throw each penny individually into a wishing well and wish for two pennies per wish. Repeat until sufficiently wealthy." – Think Like a Billionaire, Donald Trump
like you cant actually buy anything with it
SovietFriends posted:i assume like 90 percent of the bitcoin market is just money laundering with 10 percent dork speculators?
like you cant actually buy anything with it
you can buy drugs with it
i assume you then trust said drug dealer to magically get it to your house from a far off location and not steal your money
DildoMalone posted:um well it seems to work pretty well for a lot of people and thats like 80% of what bitcoins are used for so i guess im not really sure what youre looking for here
i think the trade got sizeable enough that the us authorities have clued in. i have seen small newspapers report arrests of people for possession that provide just enough detail that it sounds like it's bitcoin bullshit. and i'm pretty sure nearly all bitcoin drug buying is fat libertarian nerds in the states who have no irl drug contacts, so that might dry up pretty soon and then idk what anyone will use them for
bitcoins were really funny/interesting for a while when they were new, there were lots of great posts out there of mad libertarians tying themselves up in the most amazing rhetorical knots. i should try to find some
DildoMalone posted:um well it seems to work pretty well for a lot of people and thats like 80% of what bitcoins are used for so i guess im not really sure what youre looking for here
it was actually a question asked in a rude way
like how does it actually work because do they actually just send it to your house? that seems insane
not least cos prices are going to be redonk in return for being so open and accepting a currency with ridiculously high transaction costs cos its so unstable
also spent ages googleing it now and apparently everyone does launder money with it which is probably the most hilarious libertarian case study ever
Edited by SovietFriends ()
Ron Paul trying to bribe his into a club by slipping the bouncer a physical bitcoin and winking
SovietFriends posted:it was actually a question asked in a rude way
like how does it actually work because do they actually just send it to your house? that seems insane
not least cos prices are going to be redonk in return for being so open and accepting a currency with ridiculously high transaction costs cos its so unstable
also spent ages googleing it now and apparently everyone does launder money with it which is probably the most hilarious libertarian case study ever
ive heard of people getting p.o. boxes under fake names and shipping things to abandoned houses and crazy shit like that but most people ive met just ship stuff to their home address under a fake name.
really i think people are willing to put up with all the stupid bullshit surrounding it just because it makes it really easy to do illegal stuff.
drwhat posted:i think the trade got sizeable enough that the us authorities have clued in. i have seen small newspapers report arrests of people for possession that provide just enough detail that it sounds like it's bitcoin bullshit. and i'm pretty sure nearly all bitcoin drug buying is fat libertarian nerds in the states who have no irl drug contacts, so that might dry up pretty soon and then idk what anyone will use them for
yeah, there really isnt any way for them to bust the dealers because of the way tor works so in a lot of places they try to go after the buyers. i havent heard anything about people getting nailed in the us but i think i saw something about australia and a few other places doing it. everyone i know that has used it has had plenty of drug contacts but if there arent any shrooms or acid or ecstasy or whatever in town its buy it on silkroad or wait for supply to pick up. as for whether or not itll dry up i dont know but the site has been really well known for two or three years now
Agnus_Dei posted:Those who were defending bitcoin against widespread internet mockery must feel pretty vindicated about now
you made this post three months too early joel
edit: can one of you nerds tell me how to get bitcoins. i just want to give them my credit card number and get drugs. someone fucking help please w/cherry on top
Edited by enayeneh ()
SovietFriends posted:DildoMalone posted:um well it seems to work pretty well for a lot of people and thats like 80% of what bitcoins are used for so i guess im not really sure what youre looking for here
it was actually a question asked in a rude way
like how does it actually work because do they actually just send it to your house? that seems insane
not least cos prices are going to be redonk in return for being so open and accepting a currency with ridiculously high transaction costs cos its so unstable
also spent ages googleing it now and apparently everyone does launder money with it which is probably the most hilarious libertarian case study ever
yeah its really funny, it's a perfect example of a completely insane nerd solution to a really simple problem. to even get to silkroad you use a special browser that hides all your traffic, to make a purchase you use an anonymous currency, to communicate the address you want the drugs shipped to you use a page long pgp key and a throwaway email, and then, you have illegal substances shipped either directly to the place where you live or to a place where you will be standing around waiting for them in a really obviously shady way, lmao. the alternative to all this is asking someone you know is not a cop to tell you where they got their drugs and then going to the dudes house or something.
enayeneh posted:but what if no one i know has acid. what then.
this problem is solved by the exact opposite of intricately organised nerd forums
honestly the last time i got word of acid showing up down here was 2 years ago. i got two (two acids) and lost them both literally seconds later.
also i'm not to keen on hanging out with a bunch of annoying ass druggies b/c, and this is just me, i've got my shit together and most of those busters dont. also they try to have sex with me. :<