The Simple Math Behind $300K/BTC Price Projection
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BTC is the digital era equivalent of gold. It has not replaced fiat-currencies in daily transactions (and in my opinion, will not for the foreseeable future), but it is a wonderful store of value that can be exchanged fairly easily and cheaply.
Thus, in predicting BTC’s potential value, I do the math based on the supply of gold;
- 12 million is the total number of BTC to ever be mined.
- 190 million kg is the total amount of gold that has been mined thus far.
[*] It’s worth noting that, we are actually adding roughly 3.2 million kg of gold per year. So any projections in this article are only mathematically good for the next decade, and after that the value of BTC should go up in consideration of its fixed supply and the constant rise in asset prices due to inflation.
As of today:
- 1 bitcoin = $10K
- 1 kg gold = $45K
If BTC were to replace gold as the de-facto store of value, then the BTC price should currently be $700,000 per BTC. That math is based on the ratio of 1 BTC compared to 1 kg of gold (e.g. (190/12) = 15.8) multiplied by gold’s current market-value per kg.
In other words, a value of $700,000 per BTC makes BTC as valuable as gold, given their relative total supplies. Or, to think about it another way: if everyone with gold in the coffers were to dump it for BTC, BTC price would jump to $700,000.
Instead, if BTC and gold were equally popular — which makes more sense than everyone dumping their gold all at once — , then, we would have to divide their theoretical max calculated in the previous step by approximately two; hence:
- 1 bitcoin ~= $300K
- 1 kg gold ~= $25K
Obviously, this all depends on whether or not BTC will at some point become as popular as gold. I believe it will. Our lives have been transformed immeasurably in the past decade by the invention of the iPhone; we now use mobile apps to bank, call a cab etc, and Apple Pay along with credit cards have become the de-facto payment methods replacing cash… With the upcoming rise of 3D printing, drones and virtual reality, even more changes are underway and I doubt our kids will leave home and use/exchange solid materials as frequently as we do. So I am confident that gold will become an antiquated store of value as our lives become fully digitized.
Of course, regulation (see Libra vs the US) and hackability remain significant risks for all cryptocurrencies. At any time, BTC can be declared illegal to possess and trade by governments, as China did. Exchanges like LocalBitcoins guarantee Bitcoin will survive to censorship and draconian regulations, but that friction would come at the expense of its absolute value. As for hackability, scientists should speed up their efforts to render cryptocurrencies quantum computing resistant before super-fast computers take over our devices.
