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Back of the Envelope Calculation Values Bitcoin at $29,000

Reading Time: 2 minutes by on January 15, 2018 Bitcoin, Commentary, Finance, News

A recent back of the envelope calculation ended up valuing bitcoin at $ 29,000. Initially, the computation model calculated a ballpark figure of the virtual currency at $16,000. A more comprehensive approach supplied the $29,000 estimate. A back of the envelope prediction is an informal calculation that uses estimates to attain a figure. It is better than guessing but less precise than formal assessment.

The New “Model” to Predict Bitcoin

Many crypto mavens predict bitcoin to hit $50,000 to $100,000 in 2018. However, ignoring the illogical predictions, Eliezer Alphamax – Computer Science and Accounting graduate, took a scientific approach to determine the value of the virtual currency. Alphamax said:

“As a corollary, bitcoin is worth more to the holder in a highly developed, technologically progressive country than an emerging market country (or a repressed one that bans it).”

In his initial approach, he computed that bitcoin will mainly be spent in retail settings such as Microsoft. In 2017, for instance, global retail sales totaled $23.5 trillion. Now, guessing bitcoin owners to be one percent of total retail buyers, the amount will be one percent of $27 trillion which is $270 billion.

Therefore, one can presume a maximum of $270 billion will settle via the digital asset. Now, dividing $270 billion by bitcoins in circulation will translate its value at $16,000.

“A more detailed approach to “model” the price of bitcoin yields a value of $29,000,” said Alphamax.

However, the approach seems to be incomplete as it is impossible to determine what percentage of people own bitcoins. In the United States, it is estimated approximately 15 percent, whereas in Japan and South Korea the figure may be higher.

Bitcoins Unpredictable Nature

Predicting bitcoin price is a difficult task as the nature of the most popular cryptocurrency can rise or fall dramatically within a few hours. Looking for it online is also not going to be of any help as there is not one person who can guarantee bitcoin value.

The crypto viewpoints are divided into three parts: one that advocates the digital asset, the other that opposes it and the third perspective makes up those who are unsure of how the cryptocurrency would do in the future. Although, traditional financial investors like Warren Buffet and Jamie Dimon entirely disregard the virtual currency.

According to critics, it is a bubble they may soon burst. However, individual high profile advocates of the cryptocurrency include John McAfee, pioneer of cybersecurity, has backed the steady rise of cryptocurrencies with some outrageous claims. To end, few metrics can predict the rise or fall of this asset class, as analysts must consider many novel factors.

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