Hello there Internet!

Introduction (You can skip this if you like):
Usually I do not post reviews on websites. But lately my personal philosophy has changed. Understanding everyone contribution is what make internet an awesome place for sources of information. I feel obligated to contribute something of value. So I have been writing a few reviews here and there for place like tripadvisors/yelp - my frequently used websites. Now I've been hearing about Bitcoin and actually invested in one, I would like to share my view on the potential value of Bitcoin.

About Me:
I am a full time accounting/finance professional working in one of the big financial institution. I research investing idea as a hobby on my off time. What I present here has nothing to do with the company I work for nor my profession.

Part I: Valuing Bitcoin as an asset or storage of value

Bitcoin is alot like the physical gold. In places where the infrastructure or a place of exchange is set up, you can exchange gold for fiat currency and vice versa. Bitcoin is currently functioning the same way. You can exchange and trade them for fiat currency with relative ease. So let assume Bitcoin can take market share from physical gold as a storage of value.

Estimated Total numbers of gold mined: 171,300 tonnes
http://www.bbc.co.uk/news/magazine-21969100

USD$ per ounce of gold as of today: $1232

Take 171,300 x 32573.6 = 6 billions ounces of gold x 1232 per ounce =
$7.4 Trillions USD

Divide that by 21 millions Bitcoin

Which will value each bitcoin at $354,486

Realistically, we don't think bitcoin can replace gold completely. So take a scenario where bitcoin replaces 10% of gold value and you would get $35,449 per BTC.

Optimistic like the Winklevoss. I know.

We also know that gold isn't easily transferable. And that's why I am going to value bitcoin like a money transfer business in the 2nd part of the post.

Part II: Valuing Bitcoin as a money transfer business

Because Bitcoin lives in the cyber space with zero needs for physical storage (aside from servers and hardware where the miners/ online wallets operate). That's what make it difficult to value because it can function just as well as any money transfer business.

So we can are going to look at the most comparable business: Western Union.

Western Union: Market Cap. of $9 Billions with 15% market share (Transaction volume of $79 billion)

Western Union Market Value if it own 100% Market Share: $60 billions. (Transaction volume of $527 billion)

Bitcoin value if able to capture 15%-100% of money transfer business:
$9 billions - $60 billions
Divided by 21 millions coins = $428 (@15%) to $2857 (@100%)

Bitcoin as a money transfer business operate on a much more efficient scale due to the fact that physical locations and employees are replaced by miners and hardware. So there is economic value created there by cutting cost per transaction relative to Western Union. So $428 per coin might be on the low end but it's somewhat realistic.

Part III: Valuing Bitcoin as a currency


To be updated.



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