To understand the purchasing power of 1m
BTC in the future, one way to do it is to group the possible outcomes into a few scenarios, describe what must happen in order for them to take place, and then assess the probabilities to each of the scenarios.
By multiplying the percentage probabilities with the future values and summing up, we have the weighted average future value ("expected value", EV). We may discount it to present value if we like, however in this model I don't do it but rather assume that the sums measured in dollars represent the purchasing power in today's dollars.
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A. Money becomes ubiquituous coupled with the proliferation of altcoins (thousands of them, perhaps everybody having his own coin), yet continues to have its functions in value storage, measurement and transactions as much as applicable. The world will be very much different and nobody anywhere will be poor in the sense of not having his basic needs met. In this utopian and hard-to-desribe scenario it does not really matter what the price of m
BTC is, and it may have evolved to other forms. At any rate, we can evaluate that m
BTC buys minimum $1,000. Dollars have of course been forgotten in this scenario.
B. Bitcoin totally replaces fiat worldwide and becomes the sole reserve currency. Since the valuation of the world is $400T, and most of it is financial assets, which lose their raison d'etre in the non-inflationary Bitcoin-based economy, we can conservatively estimate that the hard monetary stock of bitcoins is worth $100T and thus a m
BTC is $5,000. Maybe more, but if more, then it just means that the world will be different than what it is now and conventional valuations (I want a new car!) don't hold, due to the rapidly advancing technology.
C. Bitcoin becomes an important independent world currency or a reserve currency with real bills, moderate fractional reserve, etc. Then it can go to the same value as the stock of world's gold, which is in the same ballpark as the M1 money of USD, EUR or JPY. This would put 1m
BTC=$300.
D. Bitcoin's ascent is somehow stopped so that it spends a longer amount of time valued "something in between", not going up, but not losing its potential either. This I don't think can be a permanent situation, but then again - I never believed in 2006 that the fiat money system could be extended for 7 more years (even though there was no Bitcoin then)! Sometimes imbalance persists. A logaritmic midpoint between $1 and $300 (the following target) is $17.
E. Bitcoin fails, resulting in its value going to zero or near zero. It is actually very hard to think of a credible scenario where Bitcoin would do just this
But let's have it just as a reminder that it is in beta and also that the world is just becoming so interesting that negative as well as positive things may happen unexpectedly.
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If all the scenarios receive equal probability of 20%,
the future (2015-2020) value of 1mBTC is $1,263.- Are there possible outcomes that are not groupable to existing scenarios and thus require an additional one?
- Should the percentage probabilities be adjusted and if so, how?