Topic: Price calculation -- Which assumption is wrong or could we really go to $50k? (Read 1595 times)

Bump.

According to this article, the number is closer to 280,000 at the end of 2013 when there was a lot of activity:
http://blog.p2pfoundation.net/who-owns-all-the-bitcoins-an-infographic-of-wealth-distribution/2015/01/24

According to this the Gini is .877 (back in 2014)
https://twitter.com/mbauwens/status/447715800481542144

You also have to factor in 12% inflation currently.

I am not sure I fully understand your question. The full quote is:

"If we are at Gini = 0.9, N = 1M, which is where I think we are now, then price could easily be $50k today!"

All this says is that if the assumptions are true, then the conclusion should be true. The conclusion is not true. So maybe some of the assumptions are wrong. Or maybe price has not yet moved to where it "should" be.

I make assumptions about the following quantities.
* Gini - How evenly or unevenly coins are distributed among individual with a positive number of coins.
* N - The number of people who own a positive number of coins. I used the term "holder". However, I see that this was confusing or not quite correct. I don't mean "long term holders as opposed to other users of bitcoin". I mean everybody who has a positive number of coins.
* USD.BTC - The amount of dollars that the median user of coins is holding in coins. Actually, if I knew this amount for a user in ANY percentile, I could do the calculation. I just figured the median should be the easiest to guess.

I assume these three quantities. Based on these three, I can calculate the price of coins. IF (that's a giant IF) Gini = 0.9, N = 1M, USD.BTC = $100, THEN price = $50,600 per coin.

IF Gini = 0.8, N = 1M, USD.BTC = $100, THEN price = $111.

Yup. This calculation is extremely sensitive to the value of Gini. That's really what's driving the whole thing.

So maybe if Gini changes, price can change dramatically. If current Gini is around 0.85 and it rises to 0.9, price could explode.

Could you please answer me here

https://bitcointalksearch.org/topic/m.11877450

What would you set the number of holders to? 1M is someone else's estimate, not mine. It's the only one I've seen though.

Even if that estimate is wrong by 10 times, and the number of holders is really 100k, price could / should still be a lot higher than it is now.

I would lower the amount of holders and remove all of the exact 50 btc wallets and top holding accounts (>100 btc in one wallet) to get a better indication of a single persons avarage bitcoin holdings.

 ???Wtf? Johnie, la gente esta muy loca.

You would need over 100k coins for a 10-15% drop.  Far more then a weeks worth of coins.

3% is nothing. a decent mining farm can make the price go down more than 10-15% easily by dumping weeks worth of coins. exchanges have always had bad orderbooks. one large trader or pool can cause massive panic.

We need far more liquidity on the exchanges.  A chinese mining farm should not be able to drop the price 3% on any given day simply by dumping there weeks worth of coins.

Makes a lot of sense, thank you

I see 50K as possible as well. When? Maybe in 10-15 years.
https://bitcointalksearch.org/topic/m.11881249

The exchange rate between USD and BTC is pretty independent from amount and distribution of BTC. It is what some people are willing to pay, and other people are willing to accept. Demand varies with perceived usefulness and speculative future value, supply of old coins somewhat depends on previous price levels and mining costs, while supply of fresh coins is pretty much fixed by the block rewards. Miners will try to sell fresh coins above cost if possible, some might withhold their mined bitcoins if they feel the price is too low, but they can't withhold indefinitely since they have bills to pay.

All of these factors are not part of your computation, so I'd suggest that whatever values you use for your unknowns, the results will be meaningless.

Apart from that, I still think BTC is undervalued, and a serious increase in exchange rate is quite realistic. We need more actual use and easier accessibility for this to happen, though. Just my opinion.

Onkel Paul

We have to also understand the mining dynamics.
If BTC were at $50k a pop, and mining rewards at 3600BTC / day, the total mining revenue will be $180million a day, $66Billion a year.
If we assume a 10% mining profitability rate, then BTC network will consume $60Billion worth of electric energy to mine.
Clearly BTC is unlikely to reach $50k a pop at the current reward rate.

You didn't get me Elwar.

What I wanted to say is, why we aren't at $50K today ?

I think we can see $50K in 7-10 years, but not nowadays.

well based on the total volume of all exchanges, one should be able to estimate, roughly, the total amount of coins that are used and thus calculating the coins that are sitting in cold storage or are not used

then from that number you can somehow reach an estimate on the number of holders, which also i don't believe is 1M when the total users that are holding bitcoin are 3M

probably much less than that because basically everyone is playing with a portion of his coins in gambling site , trading or any other random investments, very few people are leaving all their coins do nothing

I don't believe there are 1 million holders.

A lot of people go buy wallet downloads but I have personally downloaded the wallet several times. You have to figure just the amount of people that have upgraded to a new computer or just download it thinking they are downloading some magic money program onto their computer.

Is there a way to calculate a minimum per holder? I would imagine each person would hold at least .001 or so. Closer to .5

That's his conclusion at the bottom of OP.

Thank you for thread OP.

But, I've a question if you don't mind.

Could you elaborate more about this please

Bitcoin is made up of early adopters with a large percentage in the world's top 1% (most Americans fall in that category). This would likely put us at a higher than world average.