Calculating the Long-Term Value of a Bitcoin


A question I often come across in the Bitcoin community is regarding the worth of bitcoins in the long run. This is how I see it. Bitcoin could either be a resounding success or a dismal failure. But, it is more likely to be the former than the latter and here’s why I think so.

If Bitcoin Succeeds, What Will It Be Worth?

When it comes to bitcoin’s success, in my opinion, these specific markets could serve as catalysts for growth. Store of value is the first way it will bring users value. Bitcoin is a lot like gold in many ways, from its restricted supply to its fungible and divisible nature. It also does not need to be carried physically, cannot be seized and is highly deflationary. While there’s a lot of debate about whether bitcoin could replace the world’s USD 3 trillion currency value in terms of velocity or gross world product of money, there’s a potential for this to happen.

The rise of the Bitcoin Bulls

Bitcoin can be compared to other currencies, or even financial assets, though it cannot be valued using traditional techniques. Bitcoin frenzy has frequently hit the markets, with value going a record high above USD 18,500 in recent times. Challenging established currencies like USD or payment systems like PayPal and Skrill, bitcoin has a lot of potential value as a stable virtual currency.

Bitcoin bulls greeted the world’s first cryptocurrency in 2009 as different from traditional currencies. So, what makes it different? This P2P virtual currency is not controlled by a single authority or central bank. Further, the entire network records bitcoin transfers between users, applying digital signatures and cryptography to verify the ownership. Its decentralised structure offers benefits like faster and cheaper transactions, privacy and freedom from regulation.

Bitcoin: Potential for Powering Growth

If bitcoin even replaces 10% of the global money supply, the market value of the crypto would be USD 3.7 trillion. With bitcoins capped at 21m, this would peg each bitcoin’s value at USD 176,000. Bitcoin is also seen as digital gold, with the potential to capture portfolios from gold and be valued at USD 7.5 trillion or USD 35,700 per bitcoin. Bitcoin’s price has a lot of headroom in respect to the trillions of dollars stored in international equity markets. Use of account, medium of exchange, store of value – there are many sides to bitcoin impacting its long-term value, which I hold to be rising in the near future, even as 2017 saw the cryptocurrency surge to historic heights.

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