Is bitcoin Worth More as Digital Gold or Digital Cash
There is little doubt that bitcoin has been a fantastic investment since it's creation in 2009. If you had invested $100 in bitcoins on Jan. 1, 2011 at 30 cents per bitcoin, you would have received a total of 333.33 bitcoins for your initial purchase, and your portfolio will be currently worth about 3.7 million usd.
Even 2017 saw phenomenal gains for bitcoin investors. The price of bitcoin surged from $1004.37 on January 2nd 2017, by a whopping 1106% to it's current price of $11,109 at the time of writing this.
Bitcoin investors have made tremendous amounts of money from their investment. But how much more can bitcoin prices appreciate? To understand the price potential of bitcoin, we will look at the two different scenarios of bitcoin maturing as digital gold as opposed to digital cash.
Valuing bitcoin as Digital Gold
Since bitcoin is commonly referred to as digital gold, it makes sense to compare it to the metal. At the time of writing this, gold has a market capitalization of $8 trillion usd and bitcoin has a market capitalization of $188.44 billion usd. If bitcoin were to have the same market capitalization as gold, it would have to appreciate by another 4200%. This would give bitcoin a price of 466,578 usd per coin. Not to shabby as far as bitcoin price valuations go!
Valuing bitcoin as Digital Cash
If bitcoin matures digital cash, then it would be comparable to the M1 of different countries — the total quantity of currency in circulation.
As of 20th November 2017, the M1 of USA is 3.63 trillion usd. If Bitcoin market capitalization will to be equal to the market capitalization of the USA, it would appreciate by 1928%.
What if bitcoin were to become the one world global currency? In 2013, the M1 of the whole world was 25 trillion usd. If bitcoin's market capitalization were to appreciate to this value, it would rise by another 13267%. This would give bitcoin the price of 1.47 million usd per coin.
1.47 million dollar bitcoin?
Even the most optimistic bitcoin enthusiasts had reservations when John McAfee announced that bitcoin would hit 1 million usd by 2020. However, if bitcoin would come replace all world currencies by 2020, then the world will see a 1.47 million dollar bitcoin.
Whether you think bitcoin is digital gold or digital cash, bitcoin's future looks very bright!
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While I do think that bitcoin will continue to grow, the million dollar bitcoin by 2020 seems far-fetched.
Have you heard of the network effect? The value will increase at the square of the number of participants. It's why the internet spread so rapidly and why bitcoin is growing exponentially as well.
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