Sunday, December 29, 2013

How much will a Bitcoin eventually be worth?

Bitcoin is the future of money.  No question.

Once the exchange rate settles down, and people realise they can make transactions without having to pay a bank or credit card company for the pleasure of pulsing some electrons down a wire, then it will be fait-acompli for the currency.

It is described as "deflationary", however this is only the case because the exchange rate against the fiat currencies is rising, so it appears so.  Once there is stability it will no longer appear deflationary.

They will then might also realise that they cannot be screwed over by their government by money printing.

So I've been thinking what will the eventual exchange rate be?

According to this Wiki article http://en.wikipedia.org/wiki/Circulation_(currency)  there was 4 trillion in circulation in 2008,  it is now 2013 and there has been a lot of money printing by the central banks so I'm guessing (I can't find any up-to-date figures) but say there is 8 trillion USD equivalent circulating now.

There is a hard limit on bitcoins of 21 million.

So simply divide one by the other:   8 Trillion divided by 21 Million.

8,000,000,000,000 / 21,000,000 =  380952.38

My estimate therefore is (at today's prices) that 1 Bitcoin will reach 380 thousand US Dollars.

So 1 bitcoin will be able to buy you something like this:

Photo: 1502 Manitou Blvd,Colorado Springs,
Colorado

1502 Manitou Blvd
Colorado Springs, Colorado

$381,000 List Price
$381,000 Converted Price *
Bedrooms
Bathrooms
4,129 Sq. Ft
40,511 Sq. Ft Lot Size


















Taken today from http://www.realtor.com/international/rdc/listing-detail/1502-Manitou-Blvd_Colorado-Springs_CO_80904_2170380371

Better get mining eh?  It would be great if a country decided to trash their currency and move completely to Bitcoin.  Maybe a country that is considering trashing all their notes, or a currency in trouble?

Now to the caveats:

1) Bitcoin is easily copiable.  E.g.  The US Government could easily say we only accept US-Bitcoins and prevent anyone else mining them.   Still not a bad outcome as all the banks are put out of business.

2) Bitcoin flaws could still be detected.