Bitcoin Legitimacy sits at $1million target
According to Iqbal Gandham, U.K managing director at eToro, a trading platform, a single coin would need to be worth $1,000,000 to move bitcoin legitimacy toward its goal.
A single bitcoin is currently worth about $3,900 even after a regulatory ban in China and critical comments on Wall Street. Even with predictions of a $25,000 high, cryptocurrency experts like Gandham don’t believe that any high below $1 million would bring bitcoin into legitimate monetary status. That would be a 300 fold run-up from its current level.
His argument comes from the value of a Santoshi. Named after bitcoin’s creator, Satoshi Nakamoto, one Satoshi is equal to 0.00000001 bitcoin.
Satoshi’s value in dollars equated to approximately $0.0000356819. Gandham stated that in order for bitcoin to be considered a legitimate currency, a Satoshi needs to be equivalent to a single penny. This would happen if bitcoin reached the $1,000,000 mark.
“It is the Satoshi with which people will buy a cup of coffee,” Gandham told MarketWatch. He said that using bitcoin now to purchase goods and services, as one would with dollars, isn’t feasible because bitcoin hasn’t reached the necessary economies of scale.
“People don’t use a bar of gold to buy things, they use subdivisions of gold,” he said, adding that using bitcoin now to purchase items is like using a bar of gold to purchase a beverage or a meal.
There are a finite number of bitcoins that will ever exist – only about 21.5 million bitcoins, based on its underlying code. It is estimated that about 16 million bitcoins have been mined so far, with only a portion of those in current circulation. Market participants also estimate that bitcoins will max out in 2141, about 124 years from now.
That is a relatively tiny number of bitcoins for a currency with ambitions of being a global currency. That is also why the value of Satoshis carry such significance. By comparison, there are approximately 1.56 trillion Federal Reserve notes in circulation as of July, which equates to around $13.6 trillion dollars in circulation, according to the Fed, as of August 2017.
While bitcoin cannot be increased once developers and miners hit the limit, Gandham says, subdivisions can be increased to, say, a conversion rate of 500,000,000 Satoshis to every one bitcoin, for example, greatly expanding the supply of Satoshis.
That level of growth may help smooth out bitcoin trading, and perhaps make it less volatile on a day-to-day and intraday basis.
“It needs to get there in the next few years if it is really going to work,” Gandham said. “People will only spend the subdivision of bitcoin—and you can only spend the subdivision—if they are of reasonable value,” he said.
Some believe it will get there. John McAfee, founder of the eponymous antivirus software company, was quoted saying that bitcoin will reach the $500,000 level within three years.
Still, recent regulations in China and negative comments from prominent financial analyts have proven the biggest drag on cyber currencies.
Vitalik Buterin, the creator of the No. 2 digital currency, Ether on Ethereum’s blockchain, recently sounded warnings about the current hype and rapid rise of digital currencies on financial site Financial Magnates. He said:
“I indeed think that we are in a bubble because all the cryptocurrencies are rising and people have a feeling that they will always continue to rise. A lot of projects are raising more money than what they would be able to in the normal VC market, and sometimes there is no match between the necessity and usefulness of the project and its ability to raise money. Additionally, this market is still young and people still don’t know how to differentiate between projects that will exist in the long term and those that won’t.”
Nevertheless, if bitcoin, and other digital currencies, can surmount its obstacles, it could take off, says Gandham.
“If bitcoin is at a million dollars the day-to-day valuation change will be insignificant to the actual value,” Gandham said.
Recently, five universities in Russia announced the introduction of blockchain into their curricula, furthering blockchain and bitcoin legitimacy.