Could there be a $50,000 bitcoin?

An anonymous viral e-mail circulating among bit...

Published Feb 18, 2014 in NoEmbed, Economics, Bitcoin

An anonymous viral e-mail circulating among bitcoin watchers and partisans lays out a few simple hypothetical usage and adoption scenarios, and their consequences for bitcoin’s price. If adopted bitcoin for all payments, its volume of $38 billion, divided by a supply of (at the time of the email’s writing) about 7 million bitcoin, would make each bitcoin worth $5,400. If $300 billion in international remittance was conducted in bitcoin, that volume alone would push the price to $42,000. Adding these, along with online poker and gas station transactions, would lead to a total transaction volume of $602 billion – and a bitcoin, even at today’s expanded supply of 12 million coins, worth $50,000.

“Those numbers are good ones to start with. In some sense, that’s like a maximum,” says Susan Athey, a professor of economics at the Stanford Graduate School of Business who has been studying bitcoin. Few would realistically argue that bitcoin will service 100% of even these silos in the near term, but the volume/supply ratio is the starting point for understanding bitcoin price – as more consumers or organizations choose to use bitcoin, increased volume will drive the price up.

Susan Athey, a Stanford economist, tackles the question, what is a bitcoin worth? There are no easy answers of course, so the number closest you’ll get from her is “somewhere between $0 and $50,000”, but it’s an interesting discussion of the potential upside tempered with the potential downsides.

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