Topic: What limits the market cap of bitcoin? (Read 1178 times)

While it's true that all currencies fluctuate some with respect to each other, in general, 1% in a day for a fiat currency is an outsized move.  Bitcoin can change by that much in a minute at times of high volatility.


I think that something is going to have to change fundamentally for bitcoin to stabilize in price.  The biggest problem right now is that there's no good way to determine how much a bitcoin is worth--it doesn't really have any intrinsic value.  The value of fiat currencies is at least more or less determined by the economy of the country that's represented by the currency.  Without some kind of economic system that's represented by bitcoin, I don't think it's ever going to become as stable as a fiat currency.

Well until now i do not know if there is a market cup in bitcoin value because it was continuous increasing which is good things to all of bitcoin earners and by continuous adoption in crypto currency it will helps the credibility of all coin would be stronger.

Yes, I can't argue against this either. Anyone producing goods for instance with fiat based upstream costs would probably find selling in BTC (and holding it) a risky strategy. couple of pounts:

i) There's the upside potential to consider too. If you sold your carrots for some bitcoins a few years ago and you'd very happy about it today.  (but you'd have to have been able to afford to hold them).
Basically volatility isn't a problem in you can afford the risk.
Say, if I'm a comfortably well off consultant who own a home, my running cost are quite low I can afford to charge my services in BTC knowing they might go up for down Vs Fiats. In general suppliers who can afford to take the risk on a portion of their income will find this much easier.

iii) Conversion to more stable values stores is always an option. If I sell my BTC and convert to fiat as soon as I sell my goods there a lot less risk. It's important to remember, fiats can go up and down too. The UKs brexit referendum dropped GBP by 20% over a few days and this affected importers significantly. It's not BTC level volatility but just pointing out there is no ultimately stable currency.
(Maybe BTC will become the ultimately stable currency one day? once everything has been mined and there a no more forks its possible BTC becomes ridiculously stable. I'm not really sure this is likely and it's not necessarily easy to define what stable actually means, for now it means compared USD but that may not always be the case.)
The downside of simply selling in BTC and converting to fiat is that BTC prices will be equally volatile.

I agree with just about everything you wrote, but want to highlight the bolded section. It seems to me that this is an impossibility, because nobody can afford to transact in btc or store value in it with such volatility. Any producer or merchant accepting btc as a payment option has to immediately convert the transaction into fiat or risk having their profit margin eaten away by the volatility. It seems impossible to me to have a parallel btc-denominated system grow along side the fiat-dominated system because everything to sustain a btc-only system is not produced presently. There will still be points where btc has to be converted in order to interact with the larger economy, and god help you as a businessman if btc is in a down period when you have to buy new supplies, because all the transactions you would have done in btc over the previous period would now be at a loss.

Yes. It would be quite interesting to know how much all current holders actually paid in total but it's something we can never know.

Something to keep in mind: bitcoin market cap is nothing more than the multiplication of bitcoin's price by the number of bitcoins in existence.  While it is somewhat useful when comparing to other investments like companies, it does not represent the amount of money that has been invested in bitcoin.

Nothing limits it per-se, except the positive awareness associated with it plus the amount that people are willing to invest in it. Seeing as to how it is a volatile asset at the whim of market forces and how there is no market regulator associated with it, most people view it as an unsafe investment and naturally the market cap is limited by the inflow of funds into it, which is why the market cap is at where it is now.

I agree. Reworld uses cases are necessary to sustain BTC long term and at the moment it must be over valued.

Sending money is an easy early uses case, but it's not clear what it might take to get crypto more widely adopted.
I was chatting to a local organic farmer recently about whether they would be interested in starting to sell their produce in BTC. I think the idea is interesting, but as most consumers aren't using BTC they unlikely to adopt. It will take time for ordinary people to get used to managing their funds and feeling safe doing so. No doubt there are more software innovations needed to really make this happen.

The other thing is money creation. Now we have central banks and commercial banks creating money (as debt) and feeding it down to companies, who use it to pay staff. This creates massive stability (inertia?) in the current system. It seems much more likely that an alternative crypto-based economy grow in parallel to this old paradigm, without some major innovations this can only happen very slowly in the margins and it will take a long time to gain critical mass.

Perhaps one day noone will ask how much a bitcoin is worth today. Rather they will ask how much a USD is worth today. But the truth is this could take long time.

If BTC crashes it could go down like the nasdaq in 2001 and take quite a long time to come back up. I think it will. If I can a stash of bitcoins, I'd definitely hold some right now, but I'd also be looking to divest some into safe stores of wealth.

The rise could be sustainable if the ecosystem around Bitcoin really expands.

As I explained some posts ago, this would occur if there are more use cases. For example, remittances is one of the fields where Bitcoin has extreme potential, because the volatility risk is much lower there as with most other applications (because the user only needs to "hold" the coin [and hold the bag if there is a crash] for some minutes, while the transaction is being confirmed). If there are more remittance operators available, and Bitcoin will be massively used for that, this would be reflected in a "sustainable" price rise.

But currently this "real adoption" still is limited - so it's perfectly possible that the current market cap is "overvalued" if we take into account the really existing current Bitcoin ecosystem. And so "Grandma and her dog" could get burned 

Market cap of bitcoin is concern with increasing demand. Although still the majority of people have no idea about bitcoin, so i am sure that as soon as people will know about bitcoin, bitcoin market cap will continue increasing. i think still bitcoin has more potential to increase its capital, because the popularity of bitcoin is increasing rapidly and even in backward countries bitcoin is now introduce and they are also taking interest to invest money in bitcoin.

Limits the market cap of bitcoifrom of e For the bitcoin price to rise  a lot of money would have to flow in. Right now it seems like every grandma and her dog is being persuaded onto the bitcoin bandwagon. Is this not a sign of an impending crash, in which those at the bottom of the pyramid get burned? Is the bitcoin rise sustainable? Where will the money be flowing in from of the limits market cap of bitcoin.

Again, the "digital gold" theory. For me, it's based on wishful thinking.

A simple example of the fundamental difference between gold and Bitcoin comes into light when trying to answer the question: Does gold have alt-coins?

You can now say that every other precious metal could be an "alt-coin" for gold. But gold has properties that can't be copied: It's beautiful (and thus used in jewelry), useful in some industrial applications (other metals have other applications), and has a lot of tradition as store of value, (as you already said but my emphasis is in another point). Bitcoin, instead, is technically much easier to copy and so fundamentally different.

Above all the third property of gold is also pointing in the direction I went with my previous post in this thread: The most important aspect that dictates long-term prices and market cap is the real use. Gold is so institutionalized as "store of value" that you would need decades or centuries to let holders switch to other assets. (And it's difficult to move, unlike Bitcoin)

Only if Bitcoin achieves an important "network" that really use it, it can come near the properties and the "un-copyability" of gold, and so become a real competitor.

Everyone knows that in coming future economy will be more dependent on bitcoin as compare to flat money that’s why the popularity of bitcoin is touching skies and on other hand many of the governments are now looking forward to bitcoin market systems into their region o that they can make profits and give boost to economy, bitcoin will be the coin of the world soon.

Total Market cap of BTC and Altcoins is about 145 bn dollar. Still, a large percentage of people all around the world are unaware of it. So it got a huge potential and large market to touch. Though the price of BTC and other altcoins are rising, it will give also give a boost to its market cap. ICO's are also attracting investors to invest more in order to earn huge profit in short spam of time.

There is no limit on market cap of bitcoin, the more the investors invest in bitcoins, the more market cap it have. But it increases our decreases due to market manipulation and increases due to a news favouring bitcoin. And considering that the combined market cap of all the cryptocurrencies is equivalent to $150bn and most of the world don't know Much about bitcoins and crypto, so there is huge amount of potential in crypto that is right now untapped and one it goes mainstream then there works be an exponential growth and market cap will reach a $1 trillion mark.

The market cap surely can surpass that value in the near future. People are flooding the money into bitcoin day by day as they are getting hold of it. That's where from the money will flow into bitcoin really and it will get its recognition into highly valued market cap. :-)


Yes, there is also big line of merchants who will want to use he bitcoin in the near future when the bitcoin open up the ways of paying and getting paid for the merchant and users. This will increase the use of bitcoin by many folds, they will buy bitcoin for the reason and remember each user will contribute to increase the market cap for sure, the process is slow but the value will be worth.

I'm sure there is room for the market cap of bitcoin. As you are saying the gold is worth 300B in just USA market then just imagine how it is worth in the whole world. That's a lot of money and if that can come into gold then I'm pretty sure it can come into all new crypto currency like bitcoin. Gold is being traded since decaded of decades and that's why it has that much supply and investment. Imagine bitcoin reached this much in just a decade so there is still big time for the bitcoin to get into action and make the world dance.

As long as the price increases due to demand then the market cap will grow even more. There is no limit actually like as they say. Also there is no need to put an extreme effort to keep the price rising or whatever like giving out cards or some sort since it just happens. It just depends on the markets respond, to the people, to the demand and nothing more.

The market cap is just a product of supply and demand for Bitcoin. If more people want it at these prices, they'll just keep buying it and the price and maker cap will keep rising. As mining gets harder and Bitcoins get more scarce, the price will keep rising. This is all part of the design of Bitcoin where the supply is limited and after the 21 million are mined, the supply ends. Bitcoin is designed to be deflationary so the value will rise over time while fiat currencies are inflationary as governments print more money.

I don't think that there is no limit for the market cap of bitcoin because its market capitalization is depending on the volume of the whole market and as long as the market is active and the people are keep on buying and selling and there is no hard dumps or panic selling then the market cap of bitcoin will continue to go up and it will not have any limit.

This is a good vis. Makes it clear how small BTC still is and how crazy economics is.
Unlike the number of dollars in circulation, or the number of bitcoins in existence, the actual marketcap of bit coin is not 'real' in the same sense. The price of BTC in dollars can fluctuate arbitrarily based on supply and demand, this could make the market cap of BTC expand or contract by billions, yet no new money was created or necessarily even changed hands.

I have a different view on that subject than most of the posters in this thread.

We have first to ask what are the assets that are "represented" by Bitcoins currently - and that depends heavily on the use cases. If we know that, and take a look on Bitcoin's properties, we can speculate about a future "market cap limit".

That sounds very theoric, but it's not so difficult: Bitcoin is, today, mainly used by people to replace savings accounts, or small amounts of shares by (relative small) speculators. It's also used by companies that offer some financial services like trading and remittances. That Bitcoin is mainly limited to these two sectors is due to its volatility (that makes the risk in most other fields "unmanageable") and high expectations on a future price increase.

So we could add these two use cases (calculate the sum of the "monetary" importance of savings accounts and the market capitalization of real remittances/trading/fintech service companies - NOT the entire banking sector because important items like insurance and loans are currently almost impossible due to Bitcoin's volatility) and we would have a realistic "market cap limit" if Bitcoin conserves the current characteristics.

We can speculate that in the future volatility will be lower, and scalability issues will be solved, so Bitcoin could be used as a "real currency" and will be much more widely adopted. But even then probably Bitcoin's market cap will be much smaller than the world's GDP, because for some use cases other money forms would be more suitable, and there are also altcoins to consider (in the past months about 50-70% of the total cryptocurrency market cap).

What limits the market cap of Bitcoin is the FUD that is created from different media outlets. The people that watch MSM media, which is the avg person, will believe in this crap and not study what Bitcoin really is and why it's not going away.

The market cap of anything is simply how much money the entire company/organization or entity is. For Bitcoin, simply add up all of the Bitcoins in existence and their current price and you get the market cap. Although, something I just realized is the market cap does not account (or maybe it does?) for lost coins. There are probably a million lost Bitcoins. Maybe not that many, but definitely a lot. That will shrink the market cap as these coins are essentially useless, but are being counted anyways.

I don't think you should compare bitcoin's market cap with the USA gold reserve or with the GDP of any country. Because bitcoin is not a mainstream currency and the legal status of bitcoin is not clear to majority of the countries. However, 70 USD billion is not a small amount, it is way higher than the GDP of many countries, probably the majority of the countries.

But slowly the picture is changing. While China banned ICO (not bitcoin) and Japan issued a license to a crypto currency exchange. We will see a lot more investment coming in to bitcoin is future. A lot of people are getting interested about bitcoin on a daily basis. If more countries start accepting bitcoin, you just can't imagine the kind of money can flow in to the crypto community. I think the main roadblock is the unclear legal status due to which we can't see many institutional investors here. Once it is legalized and institutional investors start investing in bitcoin, it will have a dream run.

Let's wait and see how much bitcoin will be mined in next years and how it will rise, you will see also how that 70 will be changed to 120 and more. Nothing limits it, everything depends on current number of bitcoin and it's price of each one. But also I want to mention and there are some lost coins, freezed wallet (many btc but lost key so it's like freezed). But as time goes and it becomes more popular + halvings, market cup is rising too because of bitcoin's price rising.

In the end the 'price' is a purely psychological value in the market. The price at which there are both sellers and buyers. If all holder decided they would not sell for less than $10k, assuming there were still buyers then that would instantly be the price, no fundementals changed in the economy but the market cap of bitcoin just trippled.

Well actually it has a limit, and it is the current amount of all assets in this world. And bitcoin won't likely be reaching that idealistically  , because thae wealth would be a thousands larger or maybe more from the cap of btc today.   So don't waste your emotions about predictions on its market cap because this is not an ICO, bitcoin is a real thing and a soon to be the next highest reserves in this world. The cap right now is just a dust from the wealth of this world, so why wouldn't you hope for more multiplied market cap right?

The only limiting factor is adoption of the currency, the supply will eventually be fixed and thus the only way market cap can increase is with an increase in demand which in theory is unlimited.

This is a good point. Currently the price is inflated because of investors, this means it's a bubble. Unless the adoption starts to rise, sooner or later investor will decide the bull run is over and start dumping bit coin. The price could drop massively.

While bitcoin as an investment tool/store of value itself creates demand, I think transaction volume from real world uses is essential if it's to take off as a currency. Until that happens we're in a bubble IMO, all that's needed is for the holders to decide it's time to sell and the price can go very low.

Ones at the bottom of pyramid are always burnt unless a few of them climb them. Yes the economy will shift to bitcoin with an endless market cap. I think only 10% people know about it as of now so it has a great potential to increase.

Well the theoretical limit is the amount of wealth everywhere but bitcoin in the world, which is tons of trillions, so yes, Bitcoin is a tiny dot in a sea of potential wealth that can come in in various forms, be precious metals like gold and silver, stocks, bonds, commodities and all kinds of assets. BTC could be worth millions of dollars if people diversified small %'s of each of their holdings on their portfolios into BTC.

This should explain it better than any words (just consider BTC is not 70 billion and not 5, but like you see, it's still nothing, we are early adopters)

Now the huge amount of the money is flowing in the bitcoin and more people are investing in bitcoin now. Price of the bitcoin is getting high as the investors are increasing. Bitcoin price and the market cap is unpredictable as you said;  you are right because the price and the market cap of the bitcoin increase with each new entry in bitcoin forum

It is hard to predict the possible market cap. We have only current cap. But all BTC holders hope that it still can multiply several times.

The cap would be sky is the limit until it reaches the possible maximum when all bitcoins have been mined and do circulate globally but knowing theres still 16m coins in circulation.If demand would really rise up on bitcoin then for sure it shoots up its price its just a simple economics subject.It can surpass those big time companies or any other currencies when it comes to its cap.We are still young and there are still big space for adoption and development.

It matters only the demand in the market because we have a lot of miners, therefore we have enough supply in the market.
But the problem that I observed is that, we have more investors than users. And this could affect the demand of bitcoin because only few numbers are using it in their regular transaction, but if bitcoin could be used in different areas then that could increase it's demand.

Realistically i think what caps the market price of bitcoin is that several factors in the stock i cluding its volatility and that fact that some countries are still wavering on integrating bitcoin to their society means that bitcoin still has not showed its true price yet.

Adoption has stalled - the number of transactions per 24 hours has been about 250,000 for over a year. Though segwit has been enabled, people arn't using it, and fees are still a problem.

I honestly think that if bitcoin doesn't resolve it's problems by the end of this year, a flippening will happen and another coin will take the crown.

True. If blockchain can prove scalability then it clearly technically better money and this should happen. In which case no-one should sell, the price will skyrocket... but

If noone sells, the price may go high but no fiat millionaires will get any bitcoins. what happens then? at some point millionaries decided they dont want to exchange everything they own for 1 BTC which could be worthless again tomorrow. price falls. Do the holder decide the game is up and they should sell now? -> price crashes. Or hold and only you BTC in the new paradigm economy?
This territory is full of paradoxes.

We need more users, especially major players in the game.

The fact we know is that there are more millionaries in the world than the number of Bitcoins in existence. Now imagine if at least one-third of these investors decided to buy 1 Bitcoin...

Everything has a limit though if you may ask me but in what extent then and with that I can't answer you but for a wild guess I think sum up all the money in the world and it is the total market cap of bitcoin, potentially. Just imagine the future of currency is bitcoin.

Bitcoin is a digital world wide currency so it means that every single Fiat money of a single country can invest in it, if that time comes that every establishment in the world really accepts bitcoin as a payment in exchange of their services then I think the value of a single bitcoin will be so high.

I think as with anything, you can have two outcomes. Growth or crash. With the Chinese news, you see a bit of a drop. You can consider this our "crash." Since there is a fair amount of backing as can be seen in OP's example of every grandma and her dog (made me laugh), there is a potential for growth as there is a general interest from those who are trying to hop onto the Bitcoin chain.

Chinese ban, Chinese manipulation. Dangerous restrictions, these are all preventing bitcoin to reach higher market caps for sure. But technically, there is not mathematical limit on bitcoin's cap.

Yes, long term. But bitcoin has risen sharply. If it's real value has not risen as much then it's likely a bubble caused by people investing because they want to make money (fiat) and intend to pull it out. Then we could see the price fall sharply, for a time until bitcoin starts demonstrating it's value more.

I'm interest reasoning about the value of bitcoin, and the available pool of money, from the more mainstream 'gambling' investors who are not invested in the economic philosophy. 
 

i appreciate there is technically no upper limit if there is no limit on the bitcoin price, but in order to buy bitcoins people need to have a liquid asset. What is the available pool of money they could use if the world when really bitcoin crazy.

I guess people could sell gold and other investments driving down the price and transfering the 'stored value' to bitcoin. Individuals who don't have any free cash to invest aren't gonna by bit coins.

There must be some way to assess the size of the available pool of money that could realistically could potentially go into bitcoin?

Currently bitcoin is worth way less than Google so presumably BTC could still go a lot higher. I'm wondering if there are any realistic economic limits to which bitcoins market cap could grow before it would have to be having a bit effect on the rest of the economy?

nothing can limit market capitalization of anything ever!
market capitalization is calculated by multiplying price by shares. it is shares because market capitalization is something that we calculate for companies not currencies! in a sense, using Market Cap for bitcoin is like wanting to tell your height in volume instead of length (say i am 100 Liter tall instead of 1.6 meter)

and because of that as long as either price or number of shares (or number of available coins) can change (which supply can not change for bitcoin) the market cap can too.

MC (rising) = Supply (fixed) * price (rising)

In case of bitcoin with its limited suply only demand limits the market cap. The current market cap is big but is is still not as high as it can be. just imagine how many new users will come when BTC would be widely used all over the world. That will significantly incease the demand and increase the bitcoin price and total market cap.

Since the price is determined by supply and demend, there is no limit. High demand and low supply cause the price to increase. buyers and sellers determine price as much as they want.

To compute the Market Capitalization you have to multiply the Bitcoin supply and the current market price of bitcoin, so there's no limit.
Supply and Demands mostly affects the price of bitcoin but there are lots of things that can affect it like News, Government Policy, Competition.

Theres no limit to the marketcap of bitcoin and you must understand about that will never have a limit. Imagine all of the people around the world are using bitcoin. There is not limit to the price of bitcoin as the stable currency like usdt. bitcoin is possible to growth 10k dollar or even 100k dollar for each bitcoin.

Currently worth $70 Bn, Is this a lot?

Personally it seems quite a lot for a fairly untested currency.

US gold reserves currently worth something like $300Bn, the largest in the world (though it's no clear if anyones checked its there). All this is less than a company like Google but still $70Bn is a lot of money.

For the bitcoin price to rise  a lot of money would have to flow in. Right now it seems like every grandma and her dog is being persuaded onto the bitcoin bandwagon. Is this not a sign of an impending crash, in which those at the bottom of the pyramid get burned? Is the bitcoin rise sustainable? Where will the money be flowing in from? Will shops have to start selling bitcoin investment scratch cards over the counter to keep the price rising?

I'm keen to head from people who can make arguments based on fundamental economic principles, either way.