I've been thinking a bit about Bitcoin's maximum value as a means of international payments, and I've come to wonder how much 1 BTC would be worth, if it had the market share that PayPal has today?
Do you think there is any reasonable way to guesstimate this?
PayPal's payment volume in 2011 was $118 billion.
That means it did about $323 million USD per-day of payment transactions.
What matters is the turnover. If the duration between when a person acquires a bitcoin and when it is spent were to be half a day, on average (pulling a number out of thin air), then the nearly 10 million bitcoins that exist today are sufficient enough support economic activity of about 20 million BTC per day. So at current valuation of $6.50 per bitcoin, bitcoin's existing supply could support $130 billion worth of economic activity.
So, if each bitcoin were to turnover twice a day, then currently the valuation of $6.50 is sufficient, but just barely so, to handle the payments market share that PayPal has today.
Now if even a tiny fraction of that volume were coming any time soon, the bitcoin exchange rate would go much higher, because system-wide turnover is nowhere near twice a day. While some people spend their bitcoins within ten minutes, others have socked them away for the next generation.
But this gives and easy round number to use. If you think turnover will be once a month, then that is 60 times the number I chose for this. So the exchange rate would be 60 X $6.50 or a BTC/USD of nearly $400.
