TODAY: 1 Bitcoin = 3.60 Ounces of Gold!!!!

in #bitcoin7 years ago (edited)

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It seemed like only yesterday that I was blogging about bitcoin reaching parity with gold, now, much less than a year later, it's over 3.5X the value of an ounce of gold!

It took bitcoin only 182 days, almost exactly half of a year, to go from gold parity (1 BTC = 1 ounce of gold) to where it now sits at around 3.6 ounces of gold to 1 BTC. That's less time than it takes to finish a single season of Major League Baseball in the US (246 days long)! It's beyond an understatement to say that bitcoin severely outperformed gold in that timeframe.

Maybe it's true that bitcoin is gold 2.0?

If it is true, then we can expect bitcoin to increase its value compared to gold many times from here. The two charts below provide visuals on just how insane of a rate of growth bitcoin has had relative to gold. The first chart zooms in on bitcoin's performance (relative to gold) over a little less than the last year (early October 2016 to present) and the second zooms out to include bitcoin's low off of the "Mt Gox high" in late 2013 (Early July, 2013 to present).


Logarithmic 12-Hour Candlestick Chart of Bitstamp vs. Gold Spot

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Logarithmic 3-Day Candlestick Chart of Bitstamp vs. Gold Spot

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12-Hour Chart Breakdown

This chart marks out the price on January 1, 2017 (point where the red horizontal line and brown vertical line intersect) at about 0.88 -- that's to say, 1 BTC was worth 0.88 ounces of gold on that day -- as well as the date that bitcoin first achieved parity with gold (horizontal blue line intersects with the vertical green line) on March 2, 2017. It also marks the "current price" (horizontal purple line) at 3.59 (it actually appreciates to 3.6 by the time that I could print out the next chart). I also threw in a quick price channel (two parallel diagonal black lines with the dotted red line running parallel between them), cuz I'm a chart technician and cuz also why not? sticks out tongue

3-Day Chart Breakdown

This chart highlights the "gold parity line" at 1.0, demonstrating how close bitcoin came to achieving parity with gold when the Mt Gox high printed in late November 2013 (red arrow). The black horizontal line, extending off of the price low marked by the green arrow, represents the lowest price that bitcoin reached (compared to gold) off of that Mt Gox high. That price came in on January 14, 2015 and it reached as low as 0.12!

All Told

So, between January 14, 2015 and today, August 31, 2017, the price of one bitcoin has went from 0.12 ounces of gold to 3.6 -- that's a 30X (3,000%) appreciation in value compared to gold in 960 days! That averages out to 3.125% higher gains per day in bitcoin vs. gold since January 14, 2015.

Not too shabby, eh?

:)

Where Will Bitcoin's Price Go?

If bitcoin ends up being gold 2.0, it only makes sense that it will continue to climb in price relative to gold, at least to the point that bitcoin's market cap surpasses gold's. That's no small feat, of course.

If that were to happen, the price of 21 million bitcoin (bitcoin's supply cap) would have to exceed the price of over 5,820,203,717 ounces of gold (the current above ground supply of gold, according to THIS source). That works out to 1 BTC achieving a price higher than 277.15 ounces of gold, which is $365,283.70 at today's gold price ($1,318.00)!

And that's a conservative estimation. The above ground supply of gold only grows over time and the total supply of bitcoin won't be reached for many decades. Not to mention the many bitcoin that are forever lost to the cyber-world by idiots who forgot or lost their bitcoin private keys...oops, I guess I did mention it after all ;)

If bitcoin is to surpass gold's market cap, given the above points, 1 BTC would probably have to exceed 300X the value of 1 ounce of gold, likely placing it above $395K should that happen.

When Can We Realistically Expect the Total Market Cap of Bitcoin to Exceed Gold's?

Your guess is as good as mine :(

However, the price channel that I drew on the 12-hour chart may give us a rough estimate of how quickly it can happen, based on the current rate of price appreciation. If we project it into the future, the point at which the red dotted line intersects with a price of 300 is a "realistic" date for such an event to occur. This assumes that the rate of increase and correction patterns will resume for the duration of that time, which is improbable, but not impossible.

Anywho, if we're to assume that the current price channel continues long enough into the future for that intersection with 300 to occur it will look as follows, using the chart software that I used for the previous two charts (Tradeview.com):

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That dotted green line marks the intersection that we're looking for, way off in a distant corner of the chart that's beyond sight of what I showed in the earlier charts, even beyond the time scale that runs across the bottom of the chart. Consequently, what the chart shows is essentially meaningless. Without having a time scale we can't know when the cross happens.

Fortunately, clicking on that dotted green line in the chart software's editor provides its coordinate information. It tells me that the Bar # is 1963. Since we know that each bar represents 12 hours and we can determine through the same tool what the current candlestick's Bar # value, it's easy to determine how many days, and therefore, what date that vertical line represents. Yipee!

Using the above logic I get a 1,664 bar difference, or 19,968 hours, which is 1,664 days.

Plugging 1,664 into THIS WEBSITE gives us the date of that intersection: March 22, 2022!!!

You Heard it Here First, Folks!

Bitcoin will reach a price in gold of 300 ounces to every 1 bitcoin on March 22, 2022.

...please don't bet on that...hahaha.

But, Seriously...

This is not intended to be investment or trading advice. What I share here is only meant for educational and/or entertainment purposes.

As much as I'd love for the price projection to be true and for all of you to become rich along with me, it's a serious stretch to make all the assumptions that had to go into this price and date prediction. But it is possible :)

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then i I have 2BTC around my neck 😄

Mr T?

LOL.

Don't be so quick to count out Gold (and Silver). G&S have been monetary mediums of exchange for 7,000 years. Bitcoin has only been in existence for less than 10. Bitcoin has yet to face any true resistance (either from governmental forces or by hackers).

Anything that goes up as fast as Bitcoin, can easily come down just as fast.

Not that I'm rooting against Bitcoin, I'm just a little more cautious and discerning.

Oh, there's been no counting out of gold or silver.

Compared to the dollar and every other fiat, I see gold and silver being much higher in value in the not too distant future and I don't foresee it losing significant purchasing power anytime within my lifetime.

That being said, IF, and this is a rather large if, but, I say it again, if bitcoin becomes mass adopted as "THEE digital currency", or even if it remains as the "safe haven" to other cryptos as the crypto market becomes mass adopted, it's not outside of possibility that single bitcoin units will be valued above $500K and even $1 million.

In other words, it's possible that silver and gold will increase many fold in value, yet still significantly under-perform compared to bitcoin. And, if I'm to be honest, I believe that this is a likely scenario.

Bitcoin has one advantage over gold and silver that can never be surmounted -- it is, or at least can be, "invisible". It's weightless. It takes up no space. You don't have to hide it or depend on someone else to protect it for you. It can't be confiscated or stolen, unless you're, to put it bluntly, an idiot.

On top of that, it has a known supply limit. As unlikely as it may be, it's possible that a meteor may one day hit the earth that significantly increases its gold or silver supply, or we may decide to mine either of them from a meteor that passes by. There could also be storehouses of above ground gold or silver that is yet unaccounted for, which, if they were discovered may cause a major price depreciation. And the list goes on for possibilities of "supply shocks". Not the case with bitcoin.

And I haven't even mentioned how it can be "magically" transported half way across the world for a very minimal fee, in a matter of minutes! I'd like to see you try that with gold or silver.

I see right now as a technological transition, much like what happened between the various ages (stone age, copper age, iron age, etc.), only this time we're transitioning from a physical representation of money/ value to a digital one -- call it the "digital age" if you like.

I can see that. It's definitely easier to move around (let alone around the planet). Obviously, Bitcoin will need to go through several more evolutions to be able to handle mass adoption.

So let me ask you this, with the so-called hard cap of 21,000,000, how do you see mass adoption being handled? Do they increase the cap by 2x, 5x, 100x and treat it like a stock split where original holders will have their holdings increased by the same factor, or do you see people running around spending .01 Satoshis??? The speed of the network will need to increase dramatically and the cost of the transactions will need to come down dramatically.

Also, what happens when people/corporations are no longer mining because the cap has been reached? What mechanisms will there be to perform all of the billions of transactions?

You've peaked my curiousity!

There is no need to mess with the cap number. If 1 BTC were to have a value of let's say $10 million (which, I'm sure you'll agree, most people would consider an impossibly high value for it to reach), then grocery purchases, if we're to assume will have costs of between $1 and $1,000, would be happening within the ten millionth to the hundred thousandth range (0.0000001 ~ 0.0001) in BTC terms.

In that case, instead of measuring in terms of whole BTC units, which would be really confusing and counter-intuitive, we'd likely be measuring in ten millionths of 1 BTC unit (which is 10 satoshi, btw) so that the bitcoin unit costs closely resemble the dollar unit costs. That way, a $100 grocery bill will equal around 100 bitcoin units.

Depending on whether bitcoin is to be the world's future solution to digital cash, it may not have to increase transaction speeds that much, if at all. If it's merely going to be a digital gold (store of value), then transaction speed isn't much of an issue. It will definitely need to become much faster if it will replace physical cash.

Bitcoin is going to increase block size to 2 MB this November, which will increase transaction speed from around 7 per second to 14. The downside to this approach is that the memory space required to hold the entire history of the bitcoin blockchain (requirements for a bitcoin node) will also double in rate (with the doubling of block size), so there is a limit to how big the blocks can be in terms of Mbs.

I don't know exactly how it works, but Lighting Network, which is also going to be implemented this November, supposedly offers a work-around solution to the block size limitations, through the use of "off chain" transactions (that, I assume, combine many transactions together outside of the network and send them in large batches to the bitcoin blockchain -- if you're reading this and find an error, please feel free to correct it). This, as far as I'm informed, makes it possible for bitcoin to handle many thousands and even millions of transactions per second in the future.

As for the cost of transactions and the mining cap, I direct you to the following quote from this source:

Transaction fees are voluntary on the part of the person making the bitcoin transaction, as the person attempting to make a transaction can include any fee or none at all in the transaction. On the other hand, nobody mining new bitcoins necessarily needs to accept the transactions and include them in the new block being created. The transaction fee is therefore an incentive on the part of the bitcoin user to make sure that a particular transaction will get included into a block.

It is envisioned that over time the cumulative effect of collecting transaction fees will allow somebody creating new blocks to "earn" more bitcoins than will be mined from new bitcoins created by the new block itself. This is also an incentive to keep trying to create new blocks as the creation of new bitcoins from the mining activity goes towards zero in the future.

Because of deep technical reasons, bitcoin block space is a scarce commodity, getting a transaction mined can be seen as purchasing a portion of it. The price of block space is set by supply and demand, although in the real world the supply of space for transactions is extremely noisy, because more becomes available (and has to be immediately consumed or it’s lost forever) every time a block is mined, and block mined is an intentionally random process, that randomness being essential for bitcoin's operation. Demand is random and cyclical. Random because each transaction is generated individually so the total amount is noisy (although that averages out to be somewhat smooth at scale) and has both daily and weekly cycles, with more transactions done during the day than at night. Demand can also be affected by speculative movements in the exchange rate.

That last paragraph says to me that each block needs to be sufficiently large so that the block space isn't so scarce and the demand can be more easily met by the miners.

Hopefully that covers everything that you were trying for.

Thanks for the conversation!

Same to you, my man.

Delicious! It remains a hard question if and when to take some profit and buy the phizz!

Perhaps the right approach might be to set a date to sell? You could wait until March 22, 2022 to sell it all ;)

My approach all along has been to sell only small portions of my total holdings at "logical price advancements" (based on technical analysis), but to keep the majority (as in: more than 50% of my initial investment) until at least 2020. When that day comes, I can assess the situation to determine reasonable steps to take from there.

The point is that I don't want to be on the sidelines if/ when the stage of major adoption sets in.

I may sell a bit once bitcoin reaches $5K, and I'll probably keep most of that profit in the crypto space (diversify between the top 10 or 20 cryptos by market cap), but I'll continue to sit on the majority of my position until one of three things happens:

1.) it goes to "shit"
2.) 2020 hits
3.) I become mega rich, meaning that I can retire for life and live more than comfortably on my profits.

I've already made back my initial investment on bitcoin, so it's all a free ride from here for me :)

History shows that owning some BTC will make someone happy then happier.

Hahaha, very true :)

This is such a golden time for BTC @jamesbrown :)
As almost all alts will appreciate on their prices too.

Given enough time, I agree.

Nice post. Resteemed.

soon to exceed $5000 and to $6000

i am waiting for 1 btc= 1 lambo

That could happen really soon if this prediction is right :)

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Tomorrow may be a bit of a stretch, though possible. I'm thinking that a few corrections will occur before that test happens, maybe inside of the next week.