First, I am not clear yet if price must return to the calculated trendline which assumes linearity over log base 10 apparently. I need to do some curve fitting on past bubble manias to see if the exponential rate remained constant during the blow off phase. Bitcoin appears to have reached the maturity phase (no longer in the stage where those who were holding as a wildly speculative option and a very small % of their net worth and were working hard on it as a currency) and is preparing to enter the blow off stage when the dumb masses come rushing in.
The Austrian theory of how a commodity becomes money is that first it is widely sought and held as a commodity, then this naturally leads to it being widely acceptable as medium-of-exchange.
The problem Bitcoin has is that it is not held for being a commodity that it isn't, rather for the promise of being a currency in the future. It puts the cart before the horse, and its intrinsic value as a commodity relies on the medium-of-exchange which can't come before its intrinsic value according to the Austrian theory above.
We see that price appreciation is radically outpacing growth of transactions that are orthogonal to the speculation and SatoshiDice dust. Thus we know the future intrinsic value is orders-of-magnitude lower than than the future market cap. The current market cap is not so huge and the current ecosystem has much potential, so we can't say much about the current intrinsic value which hasn't yet reached the potential valuation of what is already in place. It is just that the price is moving (nominally in dollars) much faster than the currency ecosystem.
Lets look at it psychologically. When the BTC price stops rising because the capital that can and will be moved into Bitcoin has slowed (or peaked), then those who own $100,000 to $millions (which probably includes all those who now own $10,000+ of BTC) are going to want to deploy their capital productively. Unless Bitcoin is as widely accepted as the dollar, then they will find their opportunities to invest BTC in businesses without it being converted to dollars will be limited and it will prevent them from optimizing their investments.
So capital will leave BTC to the point that each person holds in BTC what is reasonable for the opportunities of medium-of-exchange that are available. Since BTC price is rising so fast, we are looking at market cap saturation no latter than 2016 ($1m per BTC x 15m coins = $15 trillion) unless the general public is selling assets to buy Bitcoin, but more likely 2014 or 2015. That is not enough time to develop a wide enough medium-of-exchange ecosystem.
My expectation is the market cap will fall back to less than $1 trillion, probably in the 10 to 100 $billion range, i.e. the level when it reached maturity stage and before the mass mania enveloped and factoring in some growth in use as currency in the interim. Thus I am expecting a post-crash price for BTC of roughly $500 to $5000. The higher guesstimate assumes the bubble runs another 3 years to $1 million per BTC. I don't know how widely this bubble is going to spread in the general population. If the majority avoid it, then we might top out at $1 trillion market cap which would be $50,000 per BTC which would be early 2015ish, and thus I would expect the $500 range for the intrinsic currency value.
You see I entirely believe in the concept of how we take over the fiat system, it is just that Bitcoin's price is moving up too fast. (this is orthogonal to my view that Bitcoin is also technically flawed and would succumb to the government any way)
Some of us will be trying to do something to fix this. My projections above do not take into account if any such altcoin could moderate Bitcoin and thus make our crypto-currency ascent more sustainable and with a higher floor for the more developed intrinsic value given more time to develop with a moderation of price appreciation due to competition and dilution of the coin money supply.
Note that hitech markets can develop much faster than physical markets. I have a specific idea of how to make crypto-currency widely used as a currency, i.e. that the merchant is also the customer and going after facebook with this. As some of you may know, I created the world's first social network with 1 million users when the internet population was 100 million.
If I have time, I will take a look at the curve fitting to BTC price and comment later.
Good luck to all.
Okay let's consider the following possibility. It appears to me to be an initial mania among the tech early adopters, then a maturity phase, and now entering the blow up mass mania phase. This pace of price appreciation to $10,000 by June 2014, will pull in the masses. It will be all over the news in 2014.
Bear in mind the psychology of the following chart. Movements from $10 to $100 are not as worrisome (envious) to the general population as movements from $100 to $1000 and then from $1000 to $10,000. And that is even not factoring in potential synergistic acceleration I am positing below. It is not that someone couldn't have invested the same amount and made the same 10x gain, rather it is that the market cap relative to the world's net worth is becoming more significant. And people sense this intuitively in the level of nominal price rises and the fact that more noise is made (in the news, word-of-mouth, investment newsletters, etc) with larger market cap invested.
The Austrian theory of how a commodity becomes money is that first it is widely sought and held as a commodity, then this naturally leads to it being widely acceptable as medium-of-exchange.
The problem Bitcoin has is that it is not held for being a commodity that it isn't, rather for the promise of being a currency in the future. It puts the cart before the horse, and its intrinsic value as a commodity relies on the medium-of-exchange which can't come before its intrinsic value according to the Austrian theory above.
We see that price appreciation is radically outpacing growth of transactions that are orthogonal to the speculation and SatoshiDice dust. Thus we know the future intrinsic value is orders-of-magnitude lower than than the future market cap. The current market cap is not so huge and the current ecosystem has much potential, so we can't say much about the current intrinsic value which hasn't yet reached the potential valuation of what is already in place. It is just that the price is moving (nominally in dollars) much faster than the currency ecosystem.
Lets look at it psychologically. When the BTC price stops rising because the capital that can and will be moved into Bitcoin has slowed (or peaked), then those who own $100,000 to $millions (which probably includes all those who now own $10,000+ of BTC) are going to want to deploy their capital productively. Unless Bitcoin is as widely accepted as the dollar, then they will find their opportunities to invest BTC in businesses without it being converted to dollars will be limited and it will prevent them from optimizing their investments.
So capital will leave BTC to the point that each person holds in BTC what is reasonable for the opportunities of medium-of-exchange that are available. Since BTC price is rising so fast, we are looking at market cap saturation no latter than 2016 ($1m per BTC x 15m coins = $15 trillion) unless the general public is selling assets to buy Bitcoin, but more likely 2014 or 2015. That is not enough time to develop a wide enough medium-of-exchange ecosystem.
My expectation is the market cap will fall back to less than $1 trillion, probably in the 10 to 100 $billion range, i.e. the level when it reached maturity stage and before the mass mania enveloped and factoring in some growth in use as currency in the interim. Thus I am expecting a post-crash price for BTC of roughly $500 to $5000. The higher guesstimate assumes the bubble runs another 3 years to $1 million per BTC. I don't know how widely this bubble is going to spread in the general population. If the majority avoid it, then we might top out at $1 trillion market cap which would be $50,000 per BTC which would be early 2015ish, and thus I would expect the $500 range for the intrinsic currency value.
You see I entirely believe in the concept of how we take over the fiat system, it is just that Bitcoin's price is moving up too fast. (this is orthogonal to my view that Bitcoin is also technically flawed and would succumb to the government any way)
Some of us will be trying to do something to fix this. My projections above do not take into account if any such altcoin could moderate Bitcoin and thus make our crypto-currency ascent more sustainable and with a higher floor for the more developed intrinsic value given more time to develop with a moderation of price appreciation due to competition and dilution of the coin money supply.
Note that hitech markets can develop much faster than physical markets. I have a specific idea of how to make crypto-currency widely used as a currency, i.e. that the merchant is also the customer and going after facebook with this. As some of you may know, I created the world's first social network with 1 million users when the internet population was 100 million.
If I have time, I will take a look at the curve fitting to BTC price and comment later.
Good luck to all.
Okay let's consider the following possibility. It appears to me to be an initial mania among the tech early adopters, then a maturity phase, and now entering the blow up mass mania phase. This pace of price appreciation to $10,000 by June 2014, will pull in the masses. It will be all over the news in 2014.
Bear in mind the psychology of the following chart. Movements from $10 to $100 are not as worrisome (envious) to the general population as movements from $100 to $1000 and then from $1000 to $10,000. And that is even not factoring in potential synergistic acceleration I am positing below. It is not that someone couldn't have invested the same amount and made the same 10x gain, rather it is that the market cap relative to the world's net worth is becoming more significant. And people sense this intuitively in the level of nominal price rises and the fact that more noise is made (in the news, word-of-mouth, investment newsletters, etc) with larger market cap invested.