Summary
- Bitcoin is a currency. What makes the currency unique is that it's the most popular cryptocurrency. Research suggests that the most popular cryptocurrency will maintain its purchasing power for much longer than any other currency. In other words, the cryptocurrency will be a much better currency.
- Assuming Bitcoin's share of the money supply increases to 10% (from 2.2%) and the value of the global money supply remains unchanged (at $35.2 trillion), then that equates to a Bitcoin price of $167,619 per coin (from $41,458), and upside of 4x.
What is Bitcoin?
Bitcoin is a currency.
What's unique about Bitcoin?
What makes Bitcoin unique is that it operates on a decentralised network (i.e. without the need of a central entity, such as the Bank of England), and the supply of the currency is limited (at 21 million coins).
The main benefit of operating on a decentralised network (rather than a centralised network) is that within the network, there is no single point of failure. In a centralised network, if the central entity that operates the network fails, then the whole network - and the currency that operates on the network - fails (i.e. there is a single point of failure in the network), whereas in a decentralised network, becasue there is no central entity, there is no single point of failure, and therefore the network - and currency - is likely to last for much longer, possibly forever.
For example, the world's first ever known currency is the Mesopotamian shekel, and it was operated by a central entity (The Kingdom of Lydia). When the central entity failed, so did the currency.
Another key benefit of transacting on a decentralised network is that transaction costs are likely to be lower.
Competition
| Item | Bitcoin | US Dollar |
|---|---|---|
| Does the currency operate on a decentralised network? | Yes | No |
| Is the supply of the currency limited? | Yes | No |
| How likely is the currency to act as a store of value? | High | Low |
| Item | Bitcoin | US Dollar |
|---|---|---|
| Medium of exchange | Yes | Yes |
| Measure of value | Yes | Yes |
| Standard of deferred payment | Yes | Yes |
| Store of value | Yes | No |
| Item | Bitcoin | Ether | XRP |
|---|---|---|---|
| Does the currency operate on a decentralised network? | Yes | Yes | Yes |
| Is the supply of the currency limited? | Yes | No | No |
| Is the cryptocurrency the most popular one? | Yes | No | No |
| How likely is the currency to act as a store of value? | High | Low | Low |
Valuation
The total value of narrow money globally is estimated at $35.2 trillion as at May 2020, according to The Money Project.
The total value of Bitcoin as of today (20th March 2022) is $787 billion[1].
Accordingly, Bitcoin's share of the global money supply is 2.2%.
Bitcoin currently trades at $41,458[1] and the maximum number of coins is 21 million.
Assuming Bitcoin's share of the money supply increases to 10% (from 2.2%) and the value of the global money supply remains unchanged (at $35.2 trillion), then that equates to a Bitcoin price of $167,619 per coin (from $41,458), and upside of 4x.
Actions
To invest in Bitcoin, click here.
References