Excerpt from: THE CASE FOR BITCOIN (2015) - Scenario for a massive surge in Bitcoin valuation

Recently, the first investor in Snapchat (Jeremy Liew) said that a single Bitcoin would be worth $500K by 2030. Three years ago, I calculated $472,780 as a very likely valuation. Here's what I wrote in my book THE CASE FOR BITCOIN (2015) and exactly how I calculated my number:

"A SCENARIO FOR A MASSIVE SURGE IN BITCOIN VALUATION There are roughly 15 million bitcoins in the world. And that’s all there will be for the next few years, basically. So the ‘supply’ is effectively fixed and constant.

Of these bitcoins, roughly 5 million of them are not moving around at all in transactions (we know this because of Bitcoin’s public ledger). That means these coins are either lost or in cold storage (I.e. people are hanging on to them). And a lot of people have lost a lot of bitcoins, especially in the early days when no one really thought this was going to amount to anything. So let’s say half these coins are permanently lost.

That brings our ‘fixed supply’ down to 12.5 million — making Bitcoin even more rare right out of the gate.

Now. Again, by looking at the public ledger and making certain reasonable assumptions, we know that the absolute upper limit of the number of people who own bitcoins is 5 million. Very probably the real number is somewhere between 1 and 3 million. So I’m going to be generous and say it’s 3 million.

So worldwide, 3 million people collectively own 12.5 million bitcoins.

3 million people is a very, very small number. Remember, there are 7 billion people on the planet.

That means only .0428% of humanity owns bitcoins. That’s four one hundredths of a percent! Hold that thought in your head. Basically, what I’m pointing out is ... it’s still really, really early: this Bitcoin thing hasn’t actually kicked into high gear at all yet.

Some people have pointed out that you can think of Bitcoin as a company, and owning bitcoins is like owning shares in the ‘company’, Bitcoin. This ‘company’ is already public: anyone can buy, sell and trade Bitcoin (again,coinbase.com will be happy to help you out with this should you be so inclined. This is where I buy, and I’ve been very satisfied with them).

Here’s what Bitcoin the Company looks like (from a Facebook post by Bitcoin Foundation Chairman Brock Pierce):

BITCOIN: (a “company”):

Authorized Shares: 21m

Outstanding: 15m

Price: $385 (as of this writing)

Market Cap: $5.7B

Comps: WU ($10bn), PYPL ($4bn), Gold ($7tn)

Investment to date: $1bn (as of Nov, 2015, venture capitalists had invested

Adding this new information our previous statement, we now have this:

Worldwide, 3 million people collectively own 12.5 million bitcoins, worth, in aggregate, $5.7 billion dollars.

Now, CNBC recently (Dec 2015) ran an interesting story, postulating that there was a rising consensus that Bitcoin would be the sixth largest reserve currency in the world by the year 2030. That would put it on par with the Swiss franc.

As of 2010, there were roughly 50 billion Swiss francs in circulation, with a value of 50 billion US Dollars. If Bitcoin surged to be on par with the Swiss franc as a reserve currency, this would means a 20x return on investment from where it is today.

But let’s speculate further, shall we?

SOONER OR LATER, I’m going to guess that there will be a crisis of some sort that will likely cause Bitcoin’s valuation to suddenly spike. We’ve seen this actually happen several times already (albeit on a much smaller scale) with events
in China and Greece (the threat of default or ‘Grexit’) in 2015, and previously, in 2012, in Cypress (when banks got grabby with people’s private accounts), where the price surged to $1,200 per coin.

The reason for these surges was that Bitcoin was perceived as ‘safe’ like gold.

Like gold, Bitcoin is not tied to the fortunes of any particular country. On a long enough timeline, all Empires crumble to dust. Yet gold has always remained valuable. So it is with Bitcoin. It is a digital asset without borders or allegiance.

Nobody controls it.

Secondarily, Bitcoin is extremely mobile. Transmission of Bitcoin is instant (well, ten minutes — so nearly instant), and free, and it can go anywhere on the planet. When you’re trying to move a lot of money out of a collapsing economy in
a hurry, there’s no easier, faster or cheaper way to do it than Bitcoin.

So let’s imagine a crisis. Suddenly, 100 million people are interested in owning the limited supply of 12.5 million bitcoins, which are currently owned by just 3 million people.

What do you think will happen?

Right — supply and demand will kick in. The supply is limited, it can’t suddenly increase. So the price will spike in a big, big way to motivate those 3 million to sell some portion of their Bitcoin holdings to the 100 million who are desperate to own it.

If we’re talking about a crisis in China, that 100 million figure may well even be very low.

If this scenario happens, it will be the Mother of all Valuation Spikes. I don’t think we will have witnessed anything like it ever before.

Let’s say now that Bitcoin surges to gold-like proportions. Instead of a market cap of a mere 50 billion, all of Bitcoin would now have a market cap of 7 trillion (with a T) dollars (that’s how much all the gold on earth is worth).

That would be a 1,228x return on investment at today’s prices. A single bitcoin bought today for $385 would then be worth $472,780."