Looking into the future and contemplating on the true value of Bitcoins.

It was less than a 1000 dollars in Jan’17, crossed 5000 dollars in Oct’17, touched 20000 dollars in Dec’17 and is now prancing around 9500$ in May’18. What is determining this price besides the push and pull of buyers and sellers in exchanges? On what basis does McAfee say that it will be worth a million by 2020? (If not he’ll do this on National TV)

Calculating the price per piece of something which has a finite value and quantity is not very complicated. All you have to do is divide the total value by total quantity and bingo! you get price/ piece. Although you can definitely use this method to calculate the price of one apple if 12 of them are worth $32.50, it is not so simple when it comes to Bitcoins. For the sake of this blog, let us try to over look these complications and go for a foolhardy exploration. (If you are an economists stop reading right here and if you are a Redditor, dim down a little please.)

To calculate the “true” price of 1 BTC by the above mentioned way, we need two things: (one) - total number of Bitcoins in circulation and (two) - *the total value of money*. Once we have these values, dividing (two) by (one) will give us the price of one Bitcoin and mystery is finally solved! And we shall have a quantitative approach to the price of one Bitcoin. So, let’s get started:

To do this, I would like to take you in to a utopia where besides flying cars and huge houses standing just on a few poles everyone has a well, device connectable to the internet.

In this world, kids have never even heard of the concept of country based currency, let alone see them. There are no notes, no metallic coins and everyone without exception uses digital currencies. Although this future is yet to come (but not too far away), we’ll determine Bitcoin’s price in this utopian world with current population and stats.

Total number of Bitcoins in circulations:

Total number of Bitcoins to be ever mined are around 21 million of which around 2 to 4 million are permanently lost. Starting our foolhardy analysis at this point, let us assume the total number of bitcoins lost to be around 3 million (average of 2 and 4). Therefore, the total number of Bitcoins that in circulation is at around 18 million. That’s it, one of the variables is now know and we are half way through.

Now let us move towards the slightly trickier second variable: *total value of money*

*Total value of money*:

How do we calculate the total value of money on earth?

One of the ways to do so is the multiply the population of the earth which is around 7.6 billion at the moment with average per capita income of the world which according to world bank is at around $10000. Therefore total money that is to be distributed to the world, if all the cash is purged right this moment will be 7.6 billion * $10000 which comes out to be around $76 trillion. Another way to calculate this is just by searching on Quora about total fiat in circulation and it gives just about the same result.

Now, it’s time to do the alchemy. Let us go ahead and calculate the price of one Bitcoin given today’s population and average per capita income:

*drum rolls*

Price of 1 Bitcoin = Total value of fiat / number of bitcoins $ 76 Trillion / 18 million

which is $4.23 Million

So why is not $ 4 million dollars yet? Well simply because Bitcoin hasn’t completely replaced fiat a 100% yet and there are a number of reasons for this but a few off the top are:

More than half of the world is still not connected to internet Lack of awareness and resistance to new technology Lack of governmental support and suppression of crypto by private organization Emergence of alt coins

These are the 4 major factors which is keeping the $4 million price at bay and therefore $4 million divided by 4 (4 factors) is $1 million! Who would have thought!? McAfee, you foolhardy genuis! You are right after all and I am with you on this one!

To The Moon !