Cost of the bitcoin

Calculate what cannot be calculated

The new year is coming and It is the best time to try to predict price of Bitcoin for next year.

I don’t owe much bitcoins, but I don’t like to lose any money from my pocket. I looked through some articles and speeches of so-called “experts” in Bitcoin and was surprised to find only emotional evaluations.

Someone after yesterday’s party, not soberly up to the end, promises $ 1 million for 1 Bitcoin. Many academic analysts trying to convince me that bitcoin is a bubble, which will burst and bitcoin price will drop to zero.

I will have to wait for the first to sober up, and the second will understand what bitcoin is.

How can it be 0, when it is part of economy already?

That is, Bitcoin is supported by the economic activities of people and companies that use it in their business.

I decided not to wait, but to calculate the possible cost of Bitcoin on my own. My task was to calculate the real cost of Bitcoin with 50% accuracy. Of course, professional economists would kill me for such accuracy.

Bitcoin does not have a central bank and extras from the Ministry of Finance, so you need to use what we see and know. The volume of bitcoins and the number of outlets that use it in their work.

Each outlet, which is born and dies before our eyes, is the most free and objective indicator of the economy. Opening a store, refueling, etc., includes a lot of economic signs (incomes of the population, economic development, political stability) and all of them are characterized by the ratio of supply and demand.

Each outlet is a litmus test of the economy and its prosperity or closure, as well characterized by the state of the economy and currency, as well as a multivolume analysis of thousands of macro and microeconomic indicators.

I was extremely interested to analyze the value of Bitcoin from this position. After all, each outlet, accepting for payment currency, provides its liquidity. And its economic activity — it's value. Let’s try to associate the number of outlets with the value of the currency.

For analysis, we use data from three leading economies from the top 5. America, Britain, and Japan. The European Union is difficult to analyze, due to the significant difference between the economies of its member countries and the circulation of their national currencies in some EU countries. The economies of China and Russia are not suitable for analysis, due to the presence of strict laws on currency regulation.

America. The free mass of money (us dollars) according to open statements is 14,3 trillion dollars. Since 2006, statistics have not been maintained for m3 and m4, according to numerous experts, outside the jurisdiction of the United States, is from 30 to 50 trillion US dollars. Since our analysis is estimated, we take an average of 40 trillion. It turns out the total number of dollar mass is about 55 trillion, this is the figure we will apply in the calculations. And they accept US dollars as a means of payment for about 3.8 million retail outlets. That is, using my simplification, each outlet provides capitalization (liquidity and cost) of the US dollar by 14,473,684 dollars. Let’s move to an objective indicator, the price of gold (December 2018, an ounce costs 1,236 US dollars). It turns out each store in the United States provides the liquidity of its native currency for 11,710 ounces of gold.

England. British pounds free money 2 879 456 000 000. The number of outlets is 294,280, respectively, for each store 9,784,749 pounds (one ounce 933 pounds) and 10,487 ounces.

Japan The free money supply is 1,342,945.6 billion yen at 1.1 million retail outlets. Accordingly, the trade point is 1,220,859,636 yen and — 8,752 ounces, respectively (one ounce — 139,480 yen).

Not surprisingly, our data on developed economies is similar. Using our simplified terminology, each store brings from 8,752 to 11,710 ounces of gold to capitalize on its native currency. Take the average = 10,316 ounces per outlet.

Now we can go to Bitcoin. We take from Coinmap the number of outlets that accept Bitcoin (at the time of writing, there were 14,125 of them). The total bitcoin money supply as of December 23, 2018, is 17,436,737 BTC. Each outlet gives a capitalization of 10,316 ounces of gold, respectively. It turns out 14,125 points give a total bitcoin capitalization of 145,971,400 ounces of gold. We divide this amount by the number of bitcoins and we get one bitcoin equal to 8.37 ounces of gold. Or 10,347 dollars, respectively.

You can easily explain the trend of Bitcoin development. With the growth of retail outlets and a limited number of bitcoins (21 million maximum number). We will see that the planned “performance” of each point will be preserved and the number of points will increase. Accordingly, the smaller number of bitcoins will account for the same amount of ounces of gold. The cost of bitcoin will rise.

For a more accurate calculation, it is necessary to enter the coefficient of legality. In many countries of the world, circulation of Bitcoin is prohibited or strictly regulated and this adversely affects the rate of Bitcoin, the economic activity of outlets that use Bitcoin as a means of calculation in their economic activities.