So everyone's getting crazy about bitcoins. As I'm writing, they're worth $445, and were worth only arround $100-200 a few weeks ago... so we can say it's volatile as hell.
Of course, this is frightening for many people who think it's a bubble that will fall soon. Maybe. But you should first hear what I have to say.
First, I will introduce the market cap number that we will use, and then go on the explanation. Jump to the last part if you don't want to read sources and maths.
The market capitalization is a simple number: It is, for a stock, the number of shares multiplied by the price of one share.
In human terms, this is the total value of something.
For example, the market capitalization of Google is $345 billions. That is, ~334 millions of shares that each cost ~$1033, giving a total value of $345 billions. That's quite a lot.
Market capitalization is a good tool to evaluate the importance of something, since it is basically its total value.
Some market caps
So now, the current Bitcoin market cap is of 5.2 billions USD.
I calculated the total USD value of bitcoin transactions for a year using the data here for the last 60 days and multiplying them by 6 so they are equal to a volume of a year.
I chose only the last 60 days because the big value of bitcoin has started recently, and I think the previous values are too young to be relevant.
So, I get a total of 23,150,585,412 USD.
Now let's compare to a few other companies.
First, western union:
Their market cap is $9.1 billions and their transaction volume is $80 billions.
Total payment volume: 2,430 billions
Market cap: 90.45Billions
Market cap: $128.94 billions Payment volume: 3,768 billions.
The future value of bitcoin
So let's imagine the future of bitcoins.
If we used bitcoins as much as Western union (so, 4 times more), its market cap would supposedly have a value of $9.1 billions if it follows western union.
That would give us a price increase of 9.1 (new cap) / 5.2 (old cap), so 1.75 times the current price, which gives $780 per bitcoin.
Now I skip the explanation for the other, in short :
If bitcoin is used as much as...
Western union (4 times current usage) : It would be worth $780 per coin.
Mastercard (100 times current usage): It would be worth $7,800 per coin.
Visa (163 times current usage): It would be worth $11,086 per coin.
So bitcoins probably won't ever be used as much as credit cards. But what if they do? They would have a value this high if it follows what the others have done.
Now even if they don't, I think we can safely assume that it will be used way more. Probably more than western union, and probably less than mastercard. So somewhere in between. But that makes, at least, the $1,000 barrier breakable.
Now, nobody knows what will happen, but this gives us a nice insight of what could happen.