Quote from: greaterfool on July 09, 2014, 02:19:48 AM

Quote from: Erdogan on July 08, 2014, 09:31:42 PM

Quote from: CoinDiver on July 08, 2014, 08:55:01 PM

What does GDP have to do with market cap?

There is 30 something trillion dollars in offshore bank accounts. How much in physical gold and silver? How about paper gold and silver? USD? EURO? 1m/btc would be easy if we reach universal adoption. Of course, you'll start to measure inflation (or deflation) by a basket of good purchased with btc... and measuring btcs value in fiat currency will be idiotic.

Nothing. Even in the most optimistic case of bitcoin taking over, you can not compute the value. You can not predict how large part of the value each actor has produced, he wants to have in reserve, in the form of value compressed into bitcoins.

You know, given the fact that his compressed value tokens are safe for plunder, an actor might want to have much more than now in reserve, consequently the value of all bitcoins might be larger than the current value of all fiat money.

Hmm. I agree with most of this as well as the subsequent posts, but I don't think GDP (actually GWP, gross world product) is completely unrelated to value of bitcoin. Mind talking me through this?

Of course we can't predict anything

Even modeling BTC network growth is hard, and I'm a network nerd. Predicting BTC value is economics mixed with voodoo and I'm out of my depth there. But here's how I think GWP fits in (please correct me if I'm wrong, but go into detail!):

If a large number of people are holding long term, they're causing artificial scarcity for bitcoins. Assume that this takes a large number of BTC out of circulation for a decent amount of time. We've seen this with domain name squatters, we've seen it in the ip address black market, and we'll see it here - people like holding large swaths of imaginary numbers if they're scarce. *shrug*

The remaining available coins value will be in their utility to the people who are actually using them - either you're holding, or you're engaging in a transaction, right? Buying phone cards, sending remittances, gambling, silk road, those are all part of the GWP.

If the total value of these "utility coins" has to be more than the GWP to hit 1 million, that still tells us not much I think

But if the value is a factor of the current world GWP, that's a more likely scenario than "GWP has to double and everyone has to use BTC for all transactions that contribute to GWP in order for the spot price to be 1 MM".

It's the difference between saying 25% of the world's population has to pay their rent at current market rates in BTC for a year in order for the spot price in BTC to hit 1 million that year vs 99% of the population has to pay for everything in BTC to hit 1 million. You can only subjectively say which is more likely, but the second scenario implies a LOT more effort and progress for BTC.

The point the original poster was making was that somehow there wasn't enough money around for BTC to hit 1MM, and for my part - if a few billion people all start buying their shitty 99c smartpone apps in satoshi, and then move on to paying their phone bills and other utilities through that same mobile wallet, I think that's the quickest way we get there. Smartphone users are projected to hit 5 billion in 2017.

Predicting what long term holders do is impossible, and I agree with your analysis there, but the people who will use bitcoin for some fraction of transactions made in their otherwise "normal" fiat lives must exist as a function of GWP, I can't see how they wouldn't. (Again, network geek heavy, econ lite, so be gentle Wink

)

Well you can continue to talk about GDP or GWP or whatever, both are fundamentally unmeasurable, and have no relation to the value of money. The same goes for the fundamentally unmeasurable velocity.

And this ...

Quote

The point the original poster was making was that somehow there wasn't enough money around for BTC to hit 1MM [...]

is totally absurd. There does not have to exist any money outside of bitcoin (although in the market, there always tend to be alternatives). And if there are alternatives, like fiat, and the demand to hold value in reserve in the form of money in total is fixed, less value to the alternatives just means higher value to bitcoin.

The value is decided in the market from the mind of the actors in the demand and supply. The market consist of pairs, where each bitcoin supplier decides that it is worth it to trade a number of coins for a number of someting else. And vice versa for the bitcoin buyer. You could say the supply is the absens of demand to have, compared to the other good. What underlying reasons each actor has for his decision is unknown, maybe even for the individual actor himself. The urge to slush the money around doesnt give it any special value, only the demand to have or not to have.