So i'm trying to gather reasons and facts that would support a thesis that cryptocurrencies combined market cap may exceed a few hundred billion dollars in a few years. In order for this to happen we'd have to prove that it makes sense to store a portion of your wealth in crypocurrency, even if it's only 10%. Think of it as being diversified into another new currency.
Cryptocurrencies are inherently limited in supply, so in order to convert say 100 billion of wealth into cryptocoins, you have no choice but to drive the price up since supply is relatively fixed in the short term.
I would like to keep discussion strictly to reasons why or why not bitcoin would be a good vehicle for storage of wealth, since this would be one of the predominate reason for a sustainable price increase.
So lets look at the facts and see if it really is crazy to think that just a few years from now the combined value of cryptocurrencies may exceed 500 billion usd. To start off I will list facts that are relevant to the discussion and the thesis.
1. The current combined market cap of crypocurrencies is somewhere around $10 billion (http://coinmarketcap.com/)
2. The total value of gold in the world is somewhere around 4-6 trillion dollars. The approx value central banks hold is roughly 900 billion. (feel free to confirm these numbers)
3.The estimated wealth of the world is somewhere around 110-200 trillion ( a bit of crapshoot I know).
4. there is 1.18 trillion in federal reserve notes http://www.federalreserve.gov/faqs/currency_12773.htm
I believe they are strictly talking about printed dollar notes.There is also roughly 1 trillion USD in euros, with another 2 trillion in other currencies.
5. You do not actually need to buy 500 billion dollars of bitcoins to drive the market cap of bitcoin to 500 billion dollars.
6. Cryptocoins are extremely cheap to store and to transfer, making it extremely easy and cheap to move large sums of money around and be virtually undetectable. This will make it attractive for people hiding money around the world, and there is a LOT of money out there. (the top 2000 billionaires apparently own 33 trillion in assets). It is also lends itself to easier tax evasion which is not going away anytime soon.
7. Once bitcoin gets big enough, it would probably pay interest set completely by the market. No central bank to intervene with rates. The price volatility would eventually calm down given enough liquidity.
8. People like the decentralization and the fact that it is backed by everyone around the world making it impossible for a government to manipulate/ control/ or steal (eg gold taken by US Gov't in the 1930's, Argentina's perpetual currency inflation problems , Zimbabwe's hyperinflation, chinese RMB devaluation against USD, cypress bank theft of 2013, US fed printing... the list goes on). This makes it very attractive to store a portion of your wealth if you live in these countries or even if you loose confidence in the major currencies(USD, CAD, EUR, GBP)
9. Many 3rd world countries, especially those with a history of currency manipulation or plain mismanagement are likely to adopt bitcoin or other cyrptocoins as a legitimate currencies.
10. Total remittances exceeds 500 billion per year. Remittances via bitcoin is much more attractive as it's generally cheaper and very fast.
11. Current daily transaction in bitcoins is roughly 300 million usd. Forex daily transaction are somewhere around 4 or 5 trillion last time I checked.
The above info is meant to highlight the vast sums of money that are transacted and stored around the world. So what's to prevent even 0.5% of the wealth of the world to be transacted via cryptocurrencies. When you compare the bitcoin volume vs the total volume of money being moved around, you can definitely see how bitcoin/cryptocoins have a lot of room to grow still. This means that even at today's' seemingly retarded high prices, may not be so high after all when put in perspective. I believe it's proving to be more than just a gimmick.
There are many more reasons so please share some. I should also make clear that bitcoin may not be the end winner here, i'm sure most of us are aware by now of the potential 51% attacak problem and the massive energy wasted in mining but it has shown that cryptocurrencies may be large part of commerce world of tomorrow.
Cryptocurrencies are inherently limited in supply, so in order to convert say 100 billion of wealth into cryptocoins, you have no choice but to drive the price up since supply is relatively fixed in the short term.
I would like to keep discussion strictly to reasons why or why not bitcoin would be a good vehicle for storage of wealth, since this would be one of the predominate reason for a sustainable price increase.
So lets look at the facts and see if it really is crazy to think that just a few years from now the combined value of cryptocurrencies may exceed 500 billion usd. To start off I will list facts that are relevant to the discussion and the thesis.
1. The current combined market cap of crypocurrencies is somewhere around $10 billion (http://coinmarketcap.com/)
2. The total value of gold in the world is somewhere around 4-6 trillion dollars. The approx value central banks hold is roughly 900 billion. (feel free to confirm these numbers)
3.The estimated wealth of the world is somewhere around 110-200 trillion ( a bit of crapshoot I know).
4. there is 1.18 trillion in federal reserve notes http://www.federalreserve.gov/faqs/currency_12773.htm
I believe they are strictly talking about printed dollar notes.There is also roughly 1 trillion USD in euros, with another 2 trillion in other currencies.
5. You do not actually need to buy 500 billion dollars of bitcoins to drive the market cap of bitcoin to 500 billion dollars.
6. Cryptocoins are extremely cheap to store and to transfer, making it extremely easy and cheap to move large sums of money around and be virtually undetectable. This will make it attractive for people hiding money around the world, and there is a LOT of money out there. (the top 2000 billionaires apparently own 33 trillion in assets). It is also lends itself to easier tax evasion which is not going away anytime soon.
7. Once bitcoin gets big enough, it would probably pay interest set completely by the market. No central bank to intervene with rates. The price volatility would eventually calm down given enough liquidity.
8. People like the decentralization and the fact that it is backed by everyone around the world making it impossible for a government to manipulate/ control/ or steal (eg gold taken by US Gov't in the 1930's, Argentina's perpetual currency inflation problems , Zimbabwe's hyperinflation, chinese RMB devaluation against USD, cypress bank theft of 2013, US fed printing... the list goes on). This makes it very attractive to store a portion of your wealth if you live in these countries or even if you loose confidence in the major currencies(USD, CAD, EUR, GBP)
9. Many 3rd world countries, especially those with a history of currency manipulation or plain mismanagement are likely to adopt bitcoin or other cyrptocoins as a legitimate currencies.
10. Total remittances exceeds 500 billion per year. Remittances via bitcoin is much more attractive as it's generally cheaper and very fast.
11. Current daily transaction in bitcoins is roughly 300 million usd. Forex daily transaction are somewhere around 4 or 5 trillion last time I checked.
The above info is meant to highlight the vast sums of money that are transacted and stored around the world. So what's to prevent even 0.5% of the wealth of the world to be transacted via cryptocurrencies. When you compare the bitcoin volume vs the total volume of money being moved around, you can definitely see how bitcoin/cryptocoins have a lot of room to grow still. This means that even at today's' seemingly retarded high prices, may not be so high after all when put in perspective. I believe it's proving to be more than just a gimmick.
There are many more reasons so please share some. I should also make clear that bitcoin may not be the end winner here, i'm sure most of us are aware by now of the potential 51% attacak problem and the massive energy wasted in mining but it has shown that cryptocurrencies may be large part of commerce world of tomorrow.
