Is Bitcoin Really Going to $1 Million?

Photo: Bitcoin Wiki.

If I'd once told you intangible coins would be the biggest gainers in 2013, you'd call me nuts.

But as we head toward 2014, Bitcoin has already put up 3,311% returns. In the midst of a bull market in Bitcoin, one headline reads "Why Bitcoin is Going to $1 Million."

A bit of reality
Even after rocketing to $450 per Bitcoin, the total market size is still under $5.5 billion. That's a tiny sum, smaller than the valuation of 969 public companies, and about the amount the government debt grew each day in 2009.

In the past 30 days, average volume at one leading exchange, Bitstamp, has been about $7 million. So it doesn't take much to swing the market.

And that's what has so many people believing that the price of Bitcoin can explode. As I write this, there are only 5,458 Bitcoins standing in the way of a $500 price per bitcoin. That is to say you could move the market more than 10% with a purchase of less than $2.5 million.

What happens if big money gets involved?
A big question among enthusiasts is what happens if conventional asset managers get behind Bitcoin. What if billions of dollars, not millions, were to flood into the market?

It's impossible to know, really. But what we can know is that the price would absolutely have to go higher. Right now, all bitcoins in existence are worth all of $5.2 billion. You couldn't buy $10 billion of Bitcoin at the current price right now. There isn't enough in existence.

The hedge fund industry alone manages $2 trillion. It only takes a few Bitcoin believers of the asset management industry to send Bitcoin to heights it's never before seen.

But at the same time, the opposite can happen. A single sale of 4,800 bitcoins would send prices falling all the way to $400, from $455. That's just the cold, harsh reality of an illiquid market. Relatively small amounts of money can swing values up and down with incredible force.

Bitcoin is the ultimate in speculation. It doesn't produce cash flow. There isn't any real way to value it other than to accept what someone else is willing to pay.

And given that it's a completely new idea, one never tried before, there's no way to know where it all ends. But for many people, it's become a way to dream -- a way to think that one day, maybe, just maybe, that $455 Bitcoin might be something more than pie in the sky. 

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Read/Post Comments (13) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 16, 2013, at 10:37 AM, gskinner75006 wrote:

    Most definitely a fool's game. If you have money you don't want, PM me and I will send you my mailing address. At least you will know where your money went.

  • Report this Comment On November 16, 2013, at 11:59 AM, joss3255 wrote:

    not only btc! ltc, nmc,etc etc, however btc it's the most secure and accepted everywhere, all the other coins trade against btc, so there will allways be demand.

    Learn more at www.getbitcoins.tk

  • Report this Comment On November 16, 2013, at 2:49 PM, CBDer wrote:

    Maybe a little more useful than a tulip, but not by much.

  • Report this Comment On November 16, 2013, at 3:04 PM, thevinh wrote:

    Canadian banks don't accept bit coins transactions. You're recommending bit coins as a fool's game? Is this bit "coins stuff" recommended by Motley Fools?

  • Report this Comment On November 16, 2013, at 4:22 PM, RawFocus wrote:

    Useful for:

    - micropayments

    - secure payments

    - those who cannot get bank accounts (millions in third world countries)

    - those with poor credit ratings

    - large purchases (I mean, VERY large - due to low fees and fast clearance)

    - backup cash (ever had your bank cards stolen whilst abroad?)

    - mobile payments

    - hedging against risk of inflation / currency devaluation due to rampant money printing by first world countries

    Bitcoin is still new and governments have yet to figure out how to regulate it. Once a regulatory framework is in place, then the price of a Bitcoin could certainly skyrocket (institutional acceptance and investment). It is not in any country's interest to regulate against Bitcoin - indeed that would do nothing to stop the Bitcoin network from functioning, it would just prevent that country from benefiting from BTC income / opportunities. The USA is already lagging behind (trading volumes, not active users) due to regulatory uncertainty:

    http://www.coindesk.com/us-already-ceded-dominance-bitcoin-t...

  • Report this Comment On November 16, 2013, at 4:23 PM, chumba472 wrote:

    Bitcoins might not reach $1M but there certainly is room for growth with a $5.5B market cap. Some people question the utility of Bitcoins, and that's valid. What makes them more useful than fiat or gold? There are plenty of ways to answer this question, and for some, people might counter by saying "that's what paypal is for" or "that's what currency exchanges are for", or "that's what a credit card is for". Bitcoins are a disruptive currency that makes certain transactions many times faster and cheaper (and in the case of charge-backs, safer). There are many brilliant people heavily invested in the future of Bitcoins, and once they develop tools to make their use more widely understood and accepted by the world, there are going to be plenty of people kicking themselves for not buying instead of talking about how "bs" BTC is.

  • Report this Comment On November 16, 2013, at 5:12 PM, FuturePast wrote:

    Two elements that people tend to overlook when considering what a single unit of crypto currency (e.g. Bitcoin, Peercoin or Litecoin) could be worth is that they are:

    1) They are likely to be the most fungible currencies ever created. The ability to set the valuation of a good to 0.00000001 of a BTC or PPC is extremely powerful. Being able to buy a pack of gum as easily as you could a condo overlooking Central Park, out of the same "wallet" brings a convenience to money that is very difficult to replicate without bringing out the credit card (assuming you've got a credit card that can handle a $14.0M balance).

    2) Scarcity. There's a cap to the number of Bitcoins that can exist. This scarcity, when paired with fungibility means that the "top" of what a BTC or PPC could be worth is not limited, as long as it gradually gains larger adoption.

    The primary concern I have about Bitcoin's long-term health is that over time the energy requirements required to continue to validate transactions in the network become extremely high. Peercoin, on the other hand, was designed to account for this, from its inception, and therefore, can bring the benefits of Bitcoin to the world, without the considerable overhead.

    In any case, crypto currencies are here to stay. The ability to quickly process transactions, over the Internet, with a form of currency that is border-less and for-all-intents, private, is too powerful a concept to forget about.

  • Report this Comment On November 16, 2013, at 7:56 PM, OEUoe wrote:

    Just brilliant. When Bitcoin was trading at around 10 USD per coin, Fool writers laughed at it and disparaged it as "devoid of any real value" or something to this effect.

    Now that the price is at all times high at 40 TIMES that level, your "investment experts" finally starting to come around?

    Way to bring the best investment opportunities to your gullible readers, Motley Fool!

  • Report this Comment On November 17, 2013, at 7:04 AM, maitas44 wrote:

    The big advantage of the USD is that the US government collect its taxes in USD and have a lot of weapons to put you in jail of you don't pay.

  • Report this Comment On November 17, 2013, at 7:42 AM, VikingBear wrote:

    The problem I see with bitcoins is that, like all fiat money, their value depends on trust. As long as there are safer and/or more convenient alternatives, bitcoins are susceptable to panic selling and counterfeiting.

    Bitcoins have no intrinsic value. They can be used for obtaining goods and/or services only as long as the providers will accept them.

    I consider bitcoins to be "No-Penny Stocks" and predict that they will be subject to the same abuses as the penny stock market, and with less regulation.

  • Report this Comment On November 17, 2013, at 10:17 PM, JamesG wrote:

    A currency, any currency, is a medium of exchange for goods and services. Stability, consistency, and ubiquity are valuable qualities, not its value as an investment or measure of one currency vs. another. Otherwise it isn't a currency at all, it IS a speculative investment at best, and a new variation of the pyramid scheme at worst.

    Because of the above, and because it usurps the status quo, at some point governments are going to come down very hard on cyrpto-currencies. That notional 1 million dollar bit coin isn't going to be much use if you can only use it on a few black market web sites.

    Just go to Vegas, the scenery is prettier and the drinks are comped.

  • Report this Comment On November 18, 2013, at 1:48 AM, shakyhands wrote:

    Bitcoin has plenty of long-term potential,but for it to be useful as a medium of exchange its value needs to stabilize.Right now its price is rising too quickly in a short-term speculative blowout that must be followed by a correction.

  • Report this Comment On March 01, 2014, at 10:39 PM, Jumperv3 wrote:

    If you would like to earn some free btc's go to http://freebitco.in/?r=334525 or http://qoinpro.com/8da84dca5d878361bae5115cf69b56e7 and sign up. You will not get rich, but every little bit helps right?

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