Tech

How Much Could a Bitcoin Be Worth if it Replaced Paypal, Gold, or the US Dollar?

One thing is common with Bitcoiners is that they love to speculate on just how much a single Bitcoin could be worth. The real answer to this question is something only the future can tell, but the estimates range widely. Today, someone from Offit Capital said, “[Bitcoins are] costless to produce, and consequently ultimately worth as much.”

On the other side, many Bitcoiners like to fantasize about just how much a single Bitcoin could be worth. Here is just how much a single Bitcoin would be worth (of 21 million) if Bitcoin became as valuable as various things. Oh, and right now, a Bitcoin is worth ~$1000, see the current price here.


Bitcoin = Gold

According to OnlyGold.com, all the gold in the world is worth about 6 trillion dollars. Divide that by 21 million (total number of possible Bitcoins) and you get…
btc-gold


Bitcoin = Paypal

This is a bit more modest. What if Bitcoin replaced Paypal for online transactions, which seems plausible enough. Let’s start with the more modest valuation of Paypal, such that Bitcoin is as valuable as the whole company, not the company’s transactions.

Paypal isn’t itself publicly traded, but Ebay is and Paypal accounts for some 40% of Ebay’s revenue, according to BizJournals.com. Ebay’s Market cap is about 67 billion, 40 percent of which is 26.8 billion buck-os. Well, it’s a bit askance, but that gives us a per Bitcoin figure of…
paypal-btc


Another way of looking at Bitcoin and its relation to Paypal is to ask how much a Bitcoin would be worth if it replaced every transaction on Paypal. In other words, if Bitcoin took the place of every Paypal transaction. According to Paypal-media.net, “PayPal’s net Total Payment Volume for 2012, the total value of transactions, was $145 billion, up 22% year over year.” We’ll stick with 2012. If Bitcoin was worth this much, then a single Bitcoin would be worth…
paypal-volume


Bitcoin = Visa

Let’s say Bitcoin ousts Visa, the biggest payment processor in the world. Again, we’ll divy this up like Paypal, first if Bitcoin was worth what the company Visa is worth, and then if it was worth all the transaction volume Visa does. First, if Bitcoin was worth what the company Visa is, then a single Bitcoin would be worth…
bitcoin-visa


and now if Bitcoin was worth every transaction Visa does (source), the one would be worth…
visa-volume

Bitcoin = Housing Closing Costs for 100 Years

MoneyNews.com says, “Bitcoin holds out the possibility of instantaneous settlement of transactions in all sorts of assets, so that closing costs for housing transactions could be reduced to mere pennies, but this would require a manageable compliance framework.”

This is another industry Bitcoin could potentially overtake. Let’s suppose Bitcoin occupies the costs of all housing closing costs. This would be a weird number to arrive at, since ultimately this is money that Bitcoin could save people, but why not?

For simplicity, we’ll stick to the US. Zillow says that “2-5%” the price of a home is closing costs. Let’s go with the average of those numbers, 3.5%.

At the low estimate 3.1 million houses were sold in 2010.

The mean price of those homes was $272,900 according to the Census.gov website.

That means that 3.5% of $272,000 x 3.1 million is the rough amount of closing costs in 2010 which is about 29 billion. Suppose Bitcoin replaces those closing costs and they’re the average for the next 100 years (assuming we’ll still live in houses then), for a total of about 2.9 trillion bucks.

It’s not necessary that Bitcoin would actually be worth the number of dollars it could save, but it does stand to some reason that an entity could or should be worth the number of dollars it saves society. If that was the case, one Bitcoin would be worth…
closing-costs

Bitcoin vs. Litecoin vs. Peercoin vs. Ripple vs. Namecoin

A compare and contrast of the top 5 most capitalized cryptocurrencies.

Click here to read more

Bitcoin = United States Dollars (USD)

Defining the amount of USD is a bit tricky because much to Bitcoin-haters blindness, most money is already digital and pretty made-up, except unlike Bitcoin it’s not in a public ledger that contains every transaction.

The amount of USD in circulation is around 1.2 trillion according to Howstuffworks, a figure known as M1, but this is hardly most of the USD that exists.

According to HowStuffWorks.com, “M2 is the M1 supply, plus all of the money held in money market funds, savings accounts and CDs under $100,000. In June 2013, the M2 money supply was about $10.5 trillion.”

So that leaves us with at least 10.5 trillion, but get this, if you ever feel like the amount of money some people have seems downright made-up, you might be onto something. Again, from an outstanding HowStuffWorks piece:

M3 is M2 plus larger CDs. As of March 2006, the Fed stopped tracking the M3 money stock as an economic indicator because it felt it did not add any information on economic activity that was not already available from M2.

Makes perfect sense right? No need to track you know, where MORE of the money is. I can’t tell you how many times my bank account gets so big, the government just says, “Eh, that’s not an economic indicator.”

Anyway, we’ll go with M2 at 10.5 trillion. If Bitcoin was worth M2, then a Bitcoin would be worth…
m2


Bitcoin = All The Money in the World

Again, not sure if this is a techno-dystopia or what’s going on where this happens, but it’s fun to think about if you have Bitcoin, right? The World’s GDP was around 45 trillion in 2012. So what if all that was in Bitcoin? Then one Bitcoin would be worth…

world-gdp-bitcoin
Image credit: Hyperbole and a Half

So there you have it, Bitcoin could be worth a lot of money, if it was worth the same amount as things that are also worth a lot of money, or just are a lot of money.

Questions/Insights/Bitcoin/Complaints please email danny at heavy dot com.

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