Saturday, 30 November 2013

Bitcoin about to reach parity with Gold.....

As Bitcoin approaches parity with Gold the crypto-coin world holds its breath in eager anticipation of this much heralded event. That's when Bitcoin might stop rising in value.

I would like to point out that 100% of the above paragraph , plus the title of this post, is complete and utter baloney. At least for the time being. Bitcoin and Gold are far from parity. Here's why.

Gold is worth about $1250US per ounce at this time. (Get ready for some big numbers in words and figures). Since the beginning of civilization 383,824,798 lbs (three hundred eighty-three million eight hundred twenty-four thousand seven hundred ninety-eight) have been mined. In ounces that's 6,141,196,768 (six billion one hundred forty-one million one hundred ninety-six thousand seven hundred sixty-eight).
At today's approximate price of $1250US per ounce the total value of all the gold ever mined comes to $7,676,495,960,000.00 (seven trillion six hundred seventy-six billion four hundred ninety-five million nine hundred sixty thousand dollars).

At this time there are just over 12,000,000 (Twelve Million, what a piddling little number!) Bitcoins currently in existence. For Bitcoin to reach some sort of real parity with an ounce of gold each Bitcoin would be worth the total of the world's value of gold divided by the number of currently issued Bitcoin: $639,708.00US (six hundred and thirty nine thousand seven hundred and eight dollars) per bitcoin. That's what Bitcoin needs to be worth in order to gain parity with Gold.

Which brings us to the other main falsehood in the first paragraph: "That's when Bitcoin might stop rising in value."  A Bitcoin value of just over 600K might seem far fetched but then one year ago a Bitcoin value of $1,200.00 was also seen to be completely off the wall nuts. Some people are predicting a Bitcoin value of 1 million per coin in the foreseeable future.

If Bitcoin only does 1/10th as well each year for the next 5 years as it has done over the last 12 months it will reach $600,000US per coin with months to spare and that's even compensating for the Bitcoins which will be mined over that period..

For those of you who would (rightly) point out that quite a bit of mined gold has probably been lost or destroyed over time, it's worth mentioning that quite a few Bitcoins have also been lost. This primarily happened in the early days of Bitcoin when they had little or no value and people just plain lost their wallet credentials. The latest headline is the hard drive holding Bitcoin worth $9m buried in a UK garbage dump. There are lots of unfortunate stories like this, that's for sure. I believe that lost Bitcoins probably compensates for lost gold.

There must be a few hundreds or even thousands of people out there who have lost Bitcoins forever and are silently kicking themselves. If you're one of them and are reading this article you should be aware that Bitcoin is still very young indeed. Buy some more and don't lose them.

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