So how many of you have heard of Bitcoin? Have you heard some of the wild predictions of what a single coin could be worth? If you try to Google “prediction for bitcoin value” you will see some pretty wild predictions. A member of the board of directors of PayPal says it will hit $1 million. The First Snapchat investor says it will hit $500,000 and John McAfee of antivirus fame also predicted $500,000.
I wanted to get a feel for what I think might be an accurate short term prediction so I did some analysis of my own if you look at the World’s supply of money and investments from December 17,2015 http://money.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization/ you get the following:
• Broad Money is $80.9 Trillion (includes coins, bank notes, money market accounts, savings, checking, time deposits)
• All Stock Markets is $70 Trillion
• Gold at $1,200 oz is $7.8 Trillion
• Commercial Real Estate is at $7.6 Trillion
• Silver at $14 oz is $14 Billion
If you total all of the above assets you get $166,314,000,000,000 ( $166.3 Trillion ) I have read multiple articles where financial analysts think people should diversify their portfolios and include at least 1% in Crypto Currency (a.k.a. Bitcoin) so 1% of the $166.3 Trillion is $1,663,140,000,000 or $1.6 Trillion. If you look at the current total market capitalization of Crypto Currency it is sitting at around $150 Billion however Bitcoin only makes up about 50% of the total market capitalization. So the current market would need to grow by just over 11 times to hit the $1.6 Trillion. Well 11 times today’s price of Bitcoin when the total market cap was $150 Billion was $4,277 per Bitcoin therefore $4,277 x 11 = $47,047.
If you want to be more conservative and exclude the Broad Money from the equation because that’s just money in the system and isn’t “invested” (although some of it is savings and time deposits like CD’s) then the total assets drop from $166.3 Trillion to $85.4 Trillion with 1% being $854 Billion which would be about 5.7 times the current total market capitalization of crypto currency and $4277 x 5.7 = $24,379
I did not include Derivatives (Futures, Options, Warrants, etc) which I believe also fit into investments and these have a low end estimate of $630 Trillion if you add that into the mix the multiplier goes from 11 to 53 or $4277 x 53 = $226,681 per Bitcoin so the most conservative estimate I came up with was $24,000 to a high estimate of around $225,000 per Bitcoin. This also assumes that the new money is allocated to the same proportion of crypto currency as today which I believe to be a bad assumption I think new money will flock to Bitcoin, Ethereum, and Litecoin which would drive these numbers higher. Please also keep in mind that the numbers were largely based on amounts from 2015 and the stock market, commercial real estate and precious metals have all increased since then.
For those of you that don’t know what Bitcoin is it is a digital currency built on the concept of Blockchain. Here is an excellent video on the topic of what a Blockchain is. I think you will see that we are in for a huge paradigm shift and what could only be categorized as a disruptive technology similar to what the internet was in the 80’s.
For those that want to learn more about Crypto Currency I would suggest you read this as a primer:
https://mycrypto.guide/
Disclaimer: I am not a certified financial analyst and am not giving advice on what you should invest in, I just wanted to educate you on the topic and make you aware of one of the hottest new investments out there.
References
https://coinmarketcap.com/currencies/
https://www.cryptocoinsnews.com/bitcoin-will-hit-1-million-5-10-years-says-paypal-director/
http://www.businessinsider.com/bitcoin-price-could-be-500000-by-2030-first-snapchat-investor-says-2017-3
https://www.coinspeaker.com/2017/07/19/john-mcafee-bitcoin-price-prediction/