In my opinion, total "market capitalization" makes as much sense as multiplying my number of BTC by the latest market price. If I really want to sell all my BTC today, I will get 5-10% less than simple multiplication. And if there are not enough orders, I will not even sell all of them. More likely, if I exhaust all orders, then there will be people willing to buy the remaining BTC for even lower price than the current lowest (0.0075 EUR/BTC).
Look at this:
https://bitcoin-central.net/order_book
"Market price" of 1 BTC does not even exist. There are bids and asks for specific amounts, but nowhere you will find "the price". You mileage will vary depending on how much you want to sell or buy.
"Market" price is an aggregate that we use to evaluate the history of trading and to understand whether it was going up or down. But it's a mere conception, which is very limited. It cannot tell you how much will you gain if you sell or buy X BTC.
The "market cap" is coming to an extreme. If a single person wants to buy all BTC, how much would he pay? You have no idea because there is no order book for all BTC.
Here's my approach how to look at relation between USD and BTC in general. It is not like comparing pounds to kilograms. 1 BTC never equals some amount of USD. There is some approximation of this for low amounts, which works for a OTC trade, but on larger scale it becomes irrelevant. USDs are oranges, BTCs are apples. They are not comparable in abstract. They can only be traded one for another. So the only relevant question that could be asked: how much do I need to pay in oranges for that amount of apples at this point in time? For small amounts you may have approximate "price", but as amount grows, you need to look at the order book.
Topic: should total valuation include coins not yet mined, ie just over half a billion? (Read 831 times)
February 10, 2013, 03:52:14 AM
February 09, 2013, 08:10:57 PM
I think the answer is somewhere in the middle, and depends on the mindset of people buying, but probably current monetary base is most important.
Either someone thinks: There will be 21M BTCs, and I value this money supply at X $, thus I will only buy when the price is under X/21M $ for a BTC. --> in this case BTC valuation depends on total money supply in future (especially if that person thinks the price is too high now).
Or a person thinks: BTC valuation now is low enough, and I want to put Y % of my savings into bitcoin. So then the valuation just depends on how many people of this kind with how many money will put what percentage of their savings into the current supply of bitcoins.
I think my wording is a bit crude, but hopefully the meaning is clear.
Either someone thinks: There will be 21M BTCs, and I value this money supply at X $, thus I will only buy when the price is under X/21M $ for a BTC. --> in this case BTC valuation depends on total money supply in future (especially if that person thinks the price is too high now).
Or a person thinks: BTC valuation now is low enough, and I want to put Y % of my savings into bitcoin. So then the valuation just depends on how many people of this kind with how many money will put what percentage of their savings into the current supply of bitcoins.
I think my wording is a bit crude, but hopefully the meaning is clear.
February 09, 2013, 05:41:13 PM
Since the minting of new coins is on a fixed schedule, would it make sense to count them all when doing a total valuation?
Time is the factor that matters. Consider two years out, there will be 2.6 million more bitcoins issued than exist today, or about 25% more coins. So it makes sense to discount the value two years from now by 25% to account for the currency inflation that will occur between now and then.
So, if the total valuation is currently worth about $250 million USD, that means the market is valuing all bitcoins that will exist in two years at about $333 million USD (not including the carrying cost for those funds, so let's say $350 million).
Now is Bitcoin total valauation worth $350 million?
If Bitcoin only gaining traction for one tiny fraction of a giant market would cause it to have that valuation. Online gaming is one of those such markets. Remittance transfers is another.
Over a year and a half ago, Rick Falkvinge described the level of potential and where it will likely occur:
- http://falkvinge.net/2011/07/05/bitcoins-four-drivers-part-4-investment
February 09, 2013, 05:11:57 PM
Since the minting of new coins is on a fixed schedule, would it make sense to count them all when doing a total valuation?
In a similar way to how if you were estimating the value of all the oil in the world, you would include proven reserves (ie reserves that are reasonably certain of being recoverable under current economic and political conditions)?
Or if only 50% of a company's shares are outstanding (the other 50% being treasury shares, ie owned by the company), the valuation of the company would be share price * total number of shares, not share price * number of outstanding shares?
If this approach is used, bitcoin's total value has exceeded the half billion USD point.
In a similar way to how if you were estimating the value of all the oil in the world, you would include proven reserves (ie reserves that are reasonably certain of being recoverable under current economic and political conditions)?
Or if only 50% of a company's shares are outstanding (the other 50% being treasury shares, ie owned by the company), the valuation of the company would be share price * total number of shares, not share price * number of outstanding shares?
If this approach is used, bitcoin's total value has exceeded the half billion USD point.
Even oil may be worthless in 30 years. Say from the discovery of a better energy source.
Not saying it will be, just saying there's no way of knowing.
Those oil reserves exist regardless of whether people need them. We could theoretically get to them if we needed to. Can't say the same for Bitcoins... we have to wait for them... And who knows if we'll still need them when all 21 million are created?
Maybe they wont be worth anything then...
Maybe they'll be worth TRILLIONS.
February 09, 2013, 04:50:58 PM
Since the minting of new coins is on a fixed schedule, would it make sense to count them all when doing a total valuation?
In a similar way to how if you were estimating the value of all the oil in the world, you would include proven reserves (ie reserves that are reasonably certain of being recoverable under current economic and political conditions)?
Or if only 50% of a company's shares are outstanding (the other 50% being treasury shares, ie owned by the company), the valuation of the company would be share price * total number of shares, not share price * number of outstanding shares?
If this approach is used, bitcoin's total value has exceeded the half billion USD point.
In a similar way to how if you were estimating the value of all the oil in the world, you would include proven reserves (ie reserves that are reasonably certain of being recoverable under current economic and political conditions)?
Or if only 50% of a company's shares are outstanding (the other 50% being treasury shares, ie owned by the company), the valuation of the company would be share price * total number of shares, not share price * number of outstanding shares?
If this approach is used, bitcoin's total value has exceeded the half billion USD point.
Depends what you are using the numbers for. Just as in the oil example, there is a difference between what is available now and what will be available in the future after much time and capital is expended to bring the additional supply to market.
February 09, 2013, 04:47:45 PM
Since the minting of new coins is on a fixed schedule, would it make sense to count them all when doing a total valuation?
In a similar way to how if you were estimating the value of all the oil in the world, you would include proven reserves (ie reserves that are reasonably certain of being recoverable under current economic and political conditions)?
Or if only 50% of a company's shares are outstanding (the other 50% being treasury shares, ie owned by the company), the valuation of the company would be share price * total number of shares, not share price * number of outstanding shares?
If this approach is used, bitcoin's total value has exceeded the half billion USD point.
In a similar way to how if you were estimating the value of all the oil in the world, you would include proven reserves (ie reserves that are reasonably certain of being recoverable under current economic and political conditions)?
Or if only 50% of a company's shares are outstanding (the other 50% being treasury shares, ie owned by the company), the valuation of the company would be share price * total number of shares, not share price * number of outstanding shares?
If this approach is used, bitcoin's total value has exceeded the half billion USD point.
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