Mar 17, · Many people have even started believing that the price value of Bitcoin might go to zero. However, there are some people who still have their faith in the leading digital asset and believe that Bitcoin cannot go to zero. Some crypto analysts even say that this is the right time to buy Bitcoin. Changpeng Zhao says he will not let BTC go to zeroAuthor: Tokenhell. Dec 27, · Bitcoin Value Leaps Over the $31K Handle, BTC Sees an All-Time Price High in ECONOMICS | 2 days ago Data Shows 78% of the Circulating Bitcoin . Dec 02, · Would you consider changing the title of your article to “The Fair Price of a Bitcoin is Non-zero as Long as They Have Utility”? The best comparison I’ve heard so far is with music media. The current payment systems are similar to compact discs while bitcoin is a peerpeer network. I guess iTunes would be credit credit/debit cards.
Value of bitcoin is zeroThe Fair Price of a Bitcoin is Zero | New Economic Perspectives
From the same DollarDaze blog, we see that M3 which includes all the other buckets minus M1 is worth about 45 trillion US dollars. We will include this as a store of value that is comparable to bitcoin. To this, we will also add an estimate for the worldwide value of gold held as a store of value. While some may use jewelry as a store of value, for our model we will only consider gold bullion. Since there has recently been a deficit in the supply of silver and governments have been selling significant amounts of their silver bullion , we reason that most silver is being used in industry and not as a store of value, and will not include silver in our model.
Neither will we treat other precious metals or gemstones. In aggregate, our estimate for the global value of stores of value comparable to bitcoin, including savings accounts, small and large time deposits, money market funds, and gold bullion, come to That would be over 1, times the current price.
This is a rather simple long term model. And perhaps the biggest question it hinges on is how much adoption will bitcoin achieve? Coming up with a value for the current price of bitcoin would involve pricing in the risk of low adoption or failure of bitcoin as a currency, which could include being displaced by one or more other digital currencies. Models often consider the velocity of money, frequently arguing that since bitcoin can support transfers that take less than an hour, the velocity of money in the future bitcoin ecosystem will be higher than the current average velocity of money.
Another view on this though would be that velocity of money is not restricted by today's payment rails in any significant way and that its main determinant is the need or willingness of people to transact. Therefore, the projected velocity of money could be treated as roughly equal to its current value. Another angle at modeling the price of bitcoin, and perhaps a useful one for the near to medium term, would be to look at specific industries or markets one thinks it could impact or disrupt and think about how much of that market could end up using bitcoin.
The Bottom Line. As mathematician George Box said, "All models are wrong, some are useful. From our thinking, it seems possible that bitcoin could eventually increase in price by orders of magnitude, but it all depends on bitcoin's level of adoption. The most important question is "Will people use bitcoin? Your Money. Personal Finance. Your Practice. This is somewhat similar to fiat currencies like the US dollar USD and Pound sterling GBP , which were once backed by gold which has intrinsic value , but are now backed by the government—though some would argue that the US dollar, at least, is actually backed by debt.
If Bitcoin were to truly crash to zero, it would mean that it would be either impossible to trade Bitcoin or exchange it for goods and services, or that buy-side liquidity had fallen to zero for some reason. Realistically, one of the only plausible scenarios that could cause this is Bitcoin being banned by all world governments, potentially rendering it illegal to own or use—as is the case in a handful of countries.
This would also require taking down the entire Bitcoin network, rendering all nodes offline—including the ones in space —and making it impossible to set up new ones. This would, theoretically and unless a workaround is discovered , make it impossible to transfer Bitcoin and would prevent underground trading, likely rendering Bitcoin worthless—but this would be nearly impossible to accomplish. Another possibility is that Bitcoin might simply be superseded by a better cryptocurrency or a similar alternative payment system, rendering it obsolete and therefore worthless as a payment method or store of value.
This scenario would, however, likely take several years—perhaps even decades—to play out. Whatever the case, it is likely that Bitcoin will always retain some value, either as a collector's item or as a historic artifact for future generations. A similar phenomenon was observed relatively recently, when when the Reserve Bank of India RBI demonetized Rs and 1, notes in November due to a massive increase in counterfeit notes.
Although authentic Rs and 1, notes can no longer be used as legal tender in India, they still retain some value as works of art or as a curiosity. Another beef with bitcoin is that there's no tangible way to value it as an asset. For instance, if you want to buy shares of a publicly traded company, you can scour income statements, its balance sheet, read about industrywide catalysts, and listen to management commentary from recent conference calls and presentations.
In other words, you can make an informed decision. With bitcoin, there is no tangible data for investors to wrap their hands around. There's transaction settlement times and total circulating token supply, but neither of these figures tells us anything about the value or utility of bitcoin. I believe investors are also placing their faith in the wrong asset. Over the long term, blockchain technology is where the real value lies.
Blockchain can be used to reinvent supply-chain management and expedite overseas payments. But when folks are buying into bitcoin, they're gaining ownership in digital tokens with zero ownership of the underlying blockchain.
To build on this point, companies are also testing blockchain that's tethered to fiat currencies. A sixth issue is that blockchain is still years away from gaining real relevance. Three years ago, when blockchain companies and cryptocurrency stocks were the hottest thing since sliced bread, it was expected that blockchain technology would be quickly adopted. Little did investors foresee the Catch that would arise. Specifically, no businesses are willing to make the costly and time-consuming switch to blockchain without the technology being broadly tested -- yet companies aren't willing to make this initial leap to test the technology and prove its scalability.
By no means are cryptocurrencies the only asset to be hacked by thieves, but there are serious fraud and theft concerns that accompany bitcoin. For instance, novice bitcoin investors may not understand the need to store their tokens in a digital wallet, thereby leaving them susceptible to theft by hackers.
Additionally, it's been hypothesized by numerous blogs and publications that North Korea has turned to bitcoin mining and theft to funnel money into its isolated economy. Bitcoin is commonly viewed as the "currency" of choice for criminal organizations. Bitcoin is also an unregulated asset. Though this lack of regulation is actually a selling point for today's crypto investors given that it provides some degree of anonymity, it's bad news if something ever goes wrong. Since the majority of cryptocurrency trading and transactions occur outside the borders of the United States, the Securities and Exchange Commission is very limited in what it can do if your digital tokens are ever stolen.
The Internal Revenue Service expects you to report capital gains and losses tied to investment activity, as well as gains and losses associated with purchasing goods and services.
It's a gigantic headache. Last, but not least, all next-big-thing investment bubbles eventually burst.