Bitcoin Target Price: $23,809.52

Let’s put $550 BTC in perspective

*Disclaimer: I’m a physicist, not an economist. So I have no idea what I’m talking about.

I’ve been reading a lot of opinion pieces about Bitcoin lately (like Howard’s, Fred’s, and Howard’s old one). Opinion at large seems to be split evenly between those who say $600.00 being a bargain price and those who say it is totally worthless. So I decided to take a back-of-the-envelope calculation approach in an attempt to derive a target price for Bitcoin.

The world GDP is somewhere around 50 Trillion Dollars ($50 * 10^12). Bitcoin is designed so that there will never be more than 21 Million in existence. Let’s say that there is a possibility that Bitcoin could one day constitute 1% of world transactions. (I could envision the percentage being much higher, or 0%, but 1% is a good place to start). If this were the case, then

($50T * 1%) / 21M BTC = $23,809.52 / BTC

(Again, this isn’t a scientific treatment of the valuation of a currency, but a back-of-the-envelope approach.)

So we could see how the price of a single Bitcoin could increase from its current value of ~ $550.00 to $23,809.52. What is the likelihood of Bitcoin succeeding in being the currency used in 1% of world transactions? Let’s say it’s 10%. (Again, exact value not important.) You get a risk-adjusted value of $2,3809.52. So a BTC price of roughly $2,400 wouldn’t be a crazy price today.

I don’t know that I’ll be allocating a significant percentage of my portfolio to BTC any time soon, but I definitely believe there is upside, potentially a lot.