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.
great effort of promoters of bitcoin so far. However, I don't think you will get required mass to run something like tulip bubble. but, yeah, it is good enough to convince disgruntled gold investors to sell gold and gold stocks and invest proceeds in bitcoins
Just wanted to point out that while a particular cryptocurrency is limited in supply, there remains an infinite number of potential variations. BTC has relied on being first, as well as the network effect, to gain the early lead, but it remains unclear if another superior alternative will arise in the future.
Although there can be made an infinite number of Cryptocurrency variations. You have to understand that the MINERS have the power to make or break it. Not the market, not the pump-and-dump speculators/investors... no the Miners decide to which Network they point their hugely expensive mining equipment. This is why BTC and LTC have a future, as on those networks the mining equipment can make a ROI and those networks are large enough to withstand 51% attacks. It's not easy to move these miners to some new cryptocurrency copycat, and thereby copycats are likely to fail. FYI: one BTC miner costs about 13000 USD (3Gh delivery in about 4 months).
Don't worry, after the current price runup, there will always be miners, "just incase this thing takes off". Not to mention there are plenty of people with equipment that was ordered early but delivered late, and is ready to be used for something. Also, you don't know what kind of protocol the new coin will have, maybe a simple laptop mining will be sufficient... The best money right now is in starting new coins....
I just don't think this statement is correct. While there can be others that can certainly try and perhaps succeed. IN the end there will only be a few. BTC has so much dormant stuff that has yet to be realized because we are just not there yet. Its going to revolutionize the way we transact. Like Ive said before many could have started another facebook and you replied by saying there was Myspace...did that keep facebook from being a 100billion dollar company and changing the way we keep in touch? No.. What makes you think another coin/protocol would stop BItcoin from being numero uno...peace check out this video. https://www.youtube.com/watch?v=mD4L7xDNCmA
You clearly don't understand what takes to create and maintain a solid and safe to use decentralized crypto-currency network. It's for a reason why we trust BTC, and put billions USD in to it. It took 5 years and hundreds of millions of USD to built an unbreakable solid network and cannot be replaced that easily. Because of this BTC is valuable and will have a great feature. this in contrast to all those copycats which will die after there pump-dump-scheme. So back to the OP's post: potential market Cap can be focused on one or two crypto-currencies (they will take 99% of the whole crypt market).
BTC miners are so expensive because the complexity of finding BTC's now is so great. If BTC does not keep appreciating, then buying a miner going forward will become a losing investment. And, since substantially more than 50% BTC have been mined, and since there is a huge point of diminishing returns as the number of remaining unmined coins decreases, at some point the mining itself becomes far less relevant compared to the actual adoption itself, along with other typical pump-and-dump nonsense (e.g. China's news combined with Merrill pumping bagholders and Johnnie-come-lately's with dreams of $1300, and subsequent crash). There is something of a bubble effect in that, at some point, it becomes more practical to just hoard coins at favorable prices (which the early adopters are certainly doing), and to just watch as the correlated price and complexity increase leads to eventual huge allocation of hashing resources for almost no return, completely reliant on the parabolic price increases to justify the parabolic resource increase. These mini-crashes, such as this current 50% haircut, are painful to the mining bagholders, same as the actual bagholders of the coins that converted their government-backed currencies and/or precious metals into a cryptocurrency at inflated rates. All of the easy-to-mine coins, for BTC anyway, have been mined. Could not this process occur yet again again for a new coin?
I agree to most of your points. Three things to add: a) transaction-fees will become a significant source of income for miners, if the coin becomes mainstream (this will keep the miner in this network). b) a new coin has risks for miners. Not only the coin-price is even more volatile than BTC, it's very sensitive for 51% attacks (and thereby destroying the coin and confidence). c) Miners are hard-core. They really believe in the good that Bitcoin can do for the world and they are prepared to fight for that.
Can you clarify where exactly the billions have been allocated? There are plenty of stories of fraud and incompetence with regard to wallet theft and the like. Additionally, how much of this infrastructure can be re-tooled to (or, currently does) work with other cryptocurrencies?