With this level of volatility, <i>no one</i> would be using BTC for anything except for pure speculation. Who would dare purchase anything for 1 BTC when the value of that BTC could go up 10% the next day?<p>When there is no inherent use of something other than pure speculation, then it will end badly. This is 21st century tulip bulbs, but I cheer on anyone who has the balls to jump in and make money on BTC while there's money to be made.<p>But holding on long term is seriously a fool's game, this is a trading instrument, not something with any long term value.
I don't think it's possible to predict. Nothing like Bitcoin has ever happened before. If it works, and if it remains the leading cryptocurrency for a few years, the upside is damned near limitless (I see a comparison to gold...but gold is such tiny percentage of the worlds transactions, and it sucks compared to the efficiency of Bitcoin). I can imagine people who would never consider gold (me, for example), using Bitcoin for everything.<p>I'm trying to visualize situations that would make me stop dealing in BTC (my companies both accept BTC now), and it pretty much boils down to: The government makes it illegal and puts stiff penalties on its use. I'd, obviously, have to stop accepting it for my businesses. But, it would be disastrous for the US economy to lose this innovation, so I'm betting it won't happen.<p>The other variable that is difficult to predict is other cryptocurrencies. They dilute the market, but not by a lot, so far. If a truly superior competitor to Bitcoin came along, it might dethrone BTC, and replace it...leaving BTC vastly less valuable.<p>Finally, if BTC gets broken. i.e. double spend becomes possible, mining exploits, etc. that can't be fixed without destroying existing coins...that would also cause a massive crash. I suspect we're past the point of that being a significant risk (so many eyes looking for holes, we'd probably see if by now).<p>So, I'm betting it's got a very big upside still.
The increasing price is a reflection of an increasing reservation demand for bitcoin - which is another way of saying bitcoin is increasing in "moneyness". Bitcoin's market capitalization is about 5B right now. Gold's is about 7trillion. On a technical level bitcoin is superior as a money to gold, so I wouldn't be surprised if bitcoin attained some large fraction of gold's market capitalization, eventually. E.g., it would not surprise me if bitcoin, or some other digital currency, increased in market cap to, say, 500B over the long term (i.e., less than 10% of gold's market cap, but 100x higher than it is today), giving it a price of approximately $50,000 per bitcoin.
I don't have super high confidence BTC will survive in the mainstream more than a few years. It's too easy to shut it out by putting pressure on banks not to open accounts for the companies running exchanges. [1]<p>I had bought some BTC long ago for a few dollars a coin, and spent most of it on domain names and other purchases at sites that started taking it, just to understand the ecosystem. I had my own wallet, tried some cloud wallets and both MtGox and Coinbase.<p>I sold what was left a few days ago in the $400s/BTC. That'll cover my Christmas gifts for family this year.<p>1: <a href="http://www.forbes.com/sites/kashmirhill/2013/11/15/bitcoin-companies-and-entrepreneurs-cant-get-bank-accounts/" rel="nofollow">http://www.forbes.com/sites/kashmirhill/2013/11/15/bitcoin-c...</a>
Assuming it reaches pretty widespread use, an interesting (if <i>extremely</i> back-of-the-envelope) number might be the world's money supply divided by peak bitcoin (21 million). That is to say, if all the world's money were replaced by bitcoin right now, that's about how much value each bitcoin would have to cover.<p>I'm to lazy to track this down for the world, but a quick search indicates that the US M2 money supply is about 10.5 trillion. Replacing that with bitcoin would require each bitcoin to be worth $500,000.
I think bitcoin is only starting to gain wider adoption. There are many indicators that the currency still has a long run up:<p>* If you look at the numbers, there are today between 400K and 500K people in the world using bitcoin, which is a very small fraction of the population<p>* A new bitcoin exchange in China, the world's most populous country, has opened and offers traders 0% fees<p>* India, a country with more than a billion people, still does not have a major bitcoin exchange<p>* The bitcoin protocol has been around for more than 4 years and has been reviewed by some of the best developers in the world.<p>Many people are comparing the current run-up to the April bubble. The market today is much more fragmented. There are many, many more players, and thousands of cash-rich investors waiting on the sidelines for a small correction in price action to buy in. This alone would prevent an all-out sell-off.<p>Others point to how easily it is for one government to shut down bitcoin, by putting pressure on banks to close bitcoin exchange accounts. To do that, they would need a legitimate reason, which they don't have — and this will become more difficult as more legitimate merchants adopt bitcoin, especially the larger ones. If that does happen though, exchanges can relocate their accounts off-shore.<p>Bitcoin is still very small. The market cap is ~$5B, which is the size of a small company. For a currency that can be used by anyone anywhere in the world, that seems a little... undervalued.<p>Some of the above price targets may seem crazy, but if you compare that growth to the growth experienced by Apple or Amazon over the past few decades, it starts making sense. And bitcoin isn't a company; it's an international currency, so its growth potential is even higher.<p>My price target is $50K/BTC.
Another good question is at what point will the US government and other countries declare bitcoin illegal? If bitcoin becomes widely used it will threaten the power of major governments. I cannot see a scenario where the US or any other major country allows that to happen.
<i>Be Fearful When Others Are Greedy and Greedy When Others Are Fearful</i><p>-Warren Buffet<p>I'm not touching bitcoin while there is this kind of hype around it...
There's virtually no limit as to where it could go, since it is driven by demand and perceived value. As long as there will be a large amount of people who see value/utility in Bitcoin in the short/mid/long term, its value will continue to increase.<p>Keep in mind that for now, Bitcoin has almost zero utility. The day when Bitcoin becomes easier to use/to exchange/etc..., its value is likely to increase way further.
Bitcoin is gaining demand as a store of wealth. Given that BTC is limited in quantity, the value of 1 BTC is equal to the amount of wealth people want to store / # of BTC and the later is capped at 21M at least in the intermediate term as I understand it.<p>If there's demand to store $1 trillion of wealth in BTC, and let's say BTC supply is 20M at that point (keeps that math simple, LOL) then the price per BTC would be $50,000.<p>Is $1 trillion high or low? Well, as a point of comparison, there is about $8 trillion of wealth stored in gold. The largest bank in China has assets of just under $3 trillion. The largest US bank, $2.3 trillion.<p>So $1 trillion stored in Bitcoin is a lofty but attainable goal, IMHO.<p>Thus I think we may see price stabilization in the tens-of-thousands of dollars per bitcoin.<p>While $1M+ seems enticing, it would imply something like $20 trillion of wealth stored as bit coin which would dwarf any bank or even gold, so I think that is unlikely.<p>One of my favorite charts/metrics is to look at the "market cap" of Bitcoin (not the price per coin). This gives you the read of how much wealth is stored in BTC. It's worth sanity checking that vs. other things.<p><a href="https://blockchain.info/charts/market-cap" rel="nofollow">https://blockchain.info/charts/market-cap</a><p>Right now it feels like there's a long way up, but again I'd probably peg the $50K range for a long-term target.<p>I've publicly tweeted a price target for 1 BTC to be worth more than 1 oz of gold within the next two years though. But at the rate it's growing, I'm tempted to revise the BTC / gold crossover point to within the next year.
Target to buy, or to sell?<p>I voted $100-499, because MY target price is the price at which I will BUY back in (already sold all my BTC holdings) and that price point I have is in this $100-499 range.