Chris Hiszpanski

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Value of Bitcoin

December 27, 2020

What is the value of each Bitcoin? In other words, how high will it go?

Bitcoin is not particularly useful for small everyday transactions — confirmations times are too long, transaction costs too high, the network wouldn’t scale to handle the volume of those transactions, there are no chargebacks, etc. But it is great as a hedge against the inflationary tendencies of most fiat currencies.

In this sense, it is similar to gold, with other properties that make it better than gold, such as easier/cheaper/quicker to move, cheaper to store, easier to hide, cheaper to exchange, more difficult to forge, and easier to verify. There are approximately 10 billion ounces of gold in the world, currently priced at approximately $1,800/oz. If Bitcoin were to replace gold today, with about 18 million bitcoins mined, each coin would be equal to about $1 million. With inflation due to more minted dollars, this number should go even higher.

However, what prevents new cryptocurrencies from replacing Bitcoin, or fragmenting the space? There may only be 21 million bitcoins, but the number of blockchains is unlimited. As with most any platform, Bitcoin’s value is more due to the size of its brand, network, recognition, and user base, all of which are hard to clone, than its 21 million bitcoin limit, which is easy to clone. It is possible another platform will replace Bitcoin, like Facebook replaced MySpace, or GitHub replaced SourceForge. But it would need to offer something more valuable than Bitcoin’s brand, network, recognition, and user base.

Furthermore, unlike MySpace and SourceForge, trust is of utmost importance. Being first, when the value of the idea was unknown, and incepted by an anonymous creator, creates a trust that will likely prove difficult to unseat or replicate.

Barring a successful attack that disrupts the network, Bitcoin should eventually reach $1 million (in today’s dollars).