171202 Bitcoin’s Future

 

Screen Shot 2017-12-02 at 8.22.50 PM
http://www.bitlisten.com creates a bubble for every bitcoin transaction in real time.  The size of the bubble and the sound it makes are proportional to the trade size.

 

Once Bitcoin reaches its fighting weight, we probably won’t notice it.  Bitcoin is just another form of currency.  But the differences between life now and then will be obvious.  Exchanging money will be instantaneous.  There will no longer a need to wait for a check to clear, or stocks to be sold, or an insurance policy to be “cashed out.” Business is conducted between total strangers without a second thought.  Avoiding certain expenses simply because the banking fees are excessive would be a thing of the past.  There are no fees.  At that future time, bitcoin is just as common as dollars and cents are today.  Credit and debit cards disappear.  There’ll be no need for them. You’ll keep your bitcoin wallet on your smartphone.

In the transition from now ’til then, from bitcoin as a curiosity to bitcoin as a commodity, your other assets do not change.  Your house, which may be of average value on an average block in America, continues to be of average value.  Your stocks and bonds go up and down in value as they did before and continue into the future.  Gold and silver do what they have always done in providing safe haven and stability.  What will change is the value of bitcoin, going from zero to its ultimate value, whatever that is.  When it reaches that amount, it should become as stable as any currency can be.  We live in a dynamic world.  Shit happens.

When bitcoin started, it had no value.  The programmers, having fun with it, got the ball rolling.  Ever hear the story about the slice of pizza a programmer purchased for 10,000 bitcoin.  True enough.  From those early times, as people’s confidence grew in the concept and the currency, the value of bitcoin has continued to rise.  As it now ‘goes parabolic’ people liken the craze to a financial investment bubble, e.g. the tulip mania of the seventeenth century in the Golden Dutch Age.  Remember, the dot-com bubble of 1999?  There are similarities to that bubble and what is happening around bitcoin today.  At that time, anyone who could convince a group of investors to plunk down a few hundred grand could make themselves a website and a dot-com IPO.  Today ICOs (Initial Coin Offerings) are appearing almost daily.  Someone has an idea for a cryptocurrency and Bob’s your uncle.  The only thing is, Bitcoin is not a bubble or anything close to it.  Bitcoin represents the birth of a new asset class, cryptocurrency based on encryption techniques and money.

What is happening at the moment with bitcoin is a once in a lifetime phenomenon.  During this transition period, you can take your fiat currency and exchange it for another asset class, cryptocurrency, and ride the wave.  However, these are not tidal waters which ebb and flow.  Bitcoin is here to stay.  The only question is how pervasive it will be in our economy.  Compare it to gold. All the gold in the world weighs about 5.5 billion ounces.  There are 7.5 billion people in the world.  That works out to about 3/4 ounces gold per person.  If the gold were distributed evenly throughout the world, each person would have about $1000 in gold.  There are 21,000,000 theoretical bitcoins.  At present, 16,600,000 have been mined.  The rest will be mined in the coming 100 years as set out by the system’s designer, Satochi Nakamoto.  If Bitcoin came to represent all wealth, as we once used gold, each bitcoin would be about $452,000.

Bitcoin grew 400% from $2450, five short months ago, to $10,929 as of this writing. On the night it hit $11,500 to set a new high, it fell 20% in the next few hours. There is no doubt that the bitcoin market is volatile, no place for the faint-hearted, timid, nervous, easily scared, fearful or afraid.

bitcoin-other-world-coins

171020 Bitcoin = $455,777.33

WHAT IS BITCOIN WORTH?  WHAT WILL BITCOIN BE WORTH?  Many people have told us what they think Bitcoin might be worth today, tomorrow, by the end of the year, in 2018, in five years, in ten years.  It’s all guesswork.  No one knows. Let’s take the next few blog posts to start evaluating Bitcoin by different measures to give us a feel for what the possibilities are.

The first valuation for Bitcoin will be a comparison to gold.  Let’s say that Bitcoin one day takes over the position gold has in the world for representing wealth.  There’s a fixed amount of gold.  Of course, more is being mined every year but that represents just a small fraction of the total amount of gold that is already in existence.  From Wikipedia, there are an estimated 165,000 to 171,300 metric tons of gold. That’s about 181,881 ordinary tons or 363,762,732 pounds, or 5,820,203,717 ordinary ounces.  Let’s just call those 5.8 billion ounces.

There are 7.6 billion people in the world.  That is just about 3/4 ounce of gold per person for every person on earth.  That is, by today’s rate of $1,286.10/oz., $981.50 worth of gold per person.   All the gold in the world is worth $ 7,459,377,200,000.00.  That’s 7.5 trillion dollars worth of gold.  

There is 16,366,275 bitcoin in existence today.  If they are going to represent the same worth of gold, one bitcoin would be worth $455,777.33.  Sounds absurd? Using the M2 money supply definition, if you were to look for all of the U.S. dollars in the world you could expect to find $10.8 trillion in existence.  If you want to count only actual paper and coin, there are about $1.2 trillion around the world.  

Not exactly the same as the worth of gold, but U.S. dollars, both physical and virtual, yield numbers in the same ballpark.  Bitcoin = $455K is not impossible.

170818 Bitcoin Bubble

Why the bitcoin surge is not a bubble. Bitcoin has been around since 2009.  It was, by design, made to only have 21,000,000 bitcoins at its maximum including all coins that have yet to be issued to miners who will maintain the blockchain network behind Bitcoin.  16M are already in use.  The rest will be issued to miners for their work.  So, in a sense, bitcoin is very rare.  The designer, Satochi Nakamoto (maybe assumed name) laid out a plan that isn’t complete for 100 years.

How rare is Bitcoin?  Think about this. There are 5.5 billion ounces of golden the world.  There are 7.5 billion people in the world which works out to about 3/4 ounces of gold for every man woman and child on the planet.  If gold is about $1325. these days, that equals about $1000 in gold per person.  If the 21 million Bitcoins were to someday be as popular as gold in representing wealth, each person would have .0028 bitcoin.  If .0028 bitcoin equals $1000, then a whole bitcoin would equal $375,000.00.  Possible? xxxx xxxxx says bitcoin will be worth $100,000 by the end of 2018.  This gives you some idea of bitcoin’s potential worth.  Let’s say we were talking about US dollars.  How many dollars are there in the world? Including cash and certificates of deposit, I’ve seen some estimates of 25 trillion dollars.  That would be about $3333. per person on the planet.  Today, bitcoin at its current value is worth about 88 billion dollars, about half the value of General Electric Corporation.  Not bad for a startup. 🙂