CRYPTO: Value of All Economic Activity (or Max Bitcoin)

  Source:  WSJ

Source: WSJ

Ah, Bitcoin opinions -- it used to be that only geeks cared, then it was millionaries and financiers, and now everybody has one. With the advent of crypto-derivatives, institutional investors can bet on these opinions. You can steal one from this Bloomberg visualization telling us what every "important" business magnate thinks about BTC. Of course, most of these folks have little technical understanding, thereby lacking at least some subject-matter credibility, so why not check out the ground zero of Reddit or BitcoinTalk.

Assign no magic importance to today's price. The only thing special about $10,000 is that it is a round number, made special by the fact that humans are social animals that use shortcuts in their thinking. The growth from $1,000 to $9,839 vs to $11,483 is not meaningfully more or less impressive. Further, BTC can be subdivided into teeny fractions. So owning "1 Bitcoin" or "0.93 Bitcoin" or "0.0001 Bitcoin" is technically equivalent. No argument should be based on the unit. What we need to think about instead is the overall stock, and the best we have today is the total Price x Quantity of about $200 billion. Looking at all crypto, that is trending at $350 billion. But remember that this is also a fragile number -- it is both extremely volatile and also not particularly liquid. If I pay $100 USD for 1 percent of 1 percent or 1 percent of a company, that company would have a market capitalization of $100 million. How confident would you be that, let's say, another party would put in $5 million at the $100 million valuation based on my $100 USD?

So let's go on a numbers adventure. Suspend all disbelief (as you should when trying to take seriously an argument on its own terms), and imagine that Bitcoin is not a cryptocurrency but an inevitable technology that required first the global adoption of the internet. Or put a broader way -- the crypto economy, that uses blockchain as infrastructure, grows according to Moore's law and is not merely a foolish human meme

What can crypto become? See the spectacular visualization from the WSJ. Total US currency in circulation is $1.6 trillion, about 5x the size of global crypto. Total marketcaps on the Nasdaq in the 1999 DotCom bubble reached $3.2 trillion (adding $1.6 trillion in a year prior), which is about 10x. All gold ever mined at today's prices would be valued at $7.6 trillion, let's say 20x. Global foreign exchange reserves are at $10 trillion, or 30x. All equities of all public companies are worth $80 trillion, or 230x, and if we add in all other asset classes including alternatives and real estate, we can get up to $500 trillion. Another way to get to $500 trillion is to get the net present value of global GDP (obviously a silly exercise, but why not). That would be about 1,400x today's global crypto. And if we want to go completely bonkers, we can estimate the statistical value of all human life on the planet -- that would be $5 quadrillion, or 14,000x current crypto valuations. So there you have it. Now you know how much more it can go up, adjust your belief system accordingly.

  Source:  Adamant Research    

Source: Adamant Research