On the highest level, Bitcoin is a digital currency that utilizes its own underlying network to enable fast, low-cost, global value transfers 24/7. But many of us may have a question whether should we trade bitcoin or keep it holding for the longer term.
Let me give you some of my analysis to help you in taking decision.
Ghost accounts
As you may be aware that there are 21 million bitcoins available till 2140. However, what makes it more scarce is 30% of such bitcoin held by ghost account meaning holders may not operate such accounts due to various reasons such as unable to recover lost password etc. The more scarcity of bitcoin means more value of the cryptocurrency.
Currency Exchange and money transfer problem
To engage in value transfer today, consumers, governments, and businesses all depend upon intermediaries. These intermediaries introduce friction into value exchange and that friction manifests in the form of otherwise avoidable cost, risks, and delays. Due to decentralization and cryptocurrency, we can reliably and securely and quickly transact without relying on intermediaries. These inherent properties give the profound base to such cryptocurrency.
Delay
As you may aware domestic bank fund transfer in US takes 1-2 business days to available to the receiver. Bitcoin transfers are relatively instantaneous in comparison. It can take seconds to roughly 60 minutes which is much faster and secure than current financial transactions.
Market Share
Today foreign currency exchange typically costs 2-3% to exchange one currency for another. Bitcoin nullifies those requirements as it works as globally accepted currency. On an average global foreign currency trades approximately $7 trillion per day. If bitcoin can garner 5% market share out of it (taking much lesser into account) then also we are talking about $350 billion industry. This will require at least $60 billion monetary base. Further, we also need to consider the limited supply of bitcoin and dormant account into consideration. So even if we take 1.25 times to $60 billion then bitcoin market cap should be $75 billion.
Considering current market cap of $36 billion and price around $2200+, I believe bitcoin should trade more than $4000.
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