With all of the talk surrounding Catalonia using ETH as the national currency post independence, I’ve decided to explore what the affect on the price of cryptocurrency this would have. (I want to keep this post from being too long so I won’t editorialize about how good of an idea that might or might not be. However, I think it’s useful to point out that ETH’s capitalization is only about $27B as of this writing so it just isn’t a big enough entity to take on that job.)
$167B. This is the amount of cash required to purchase all of the goods Catalonia produced in 2016 (GDP of $250B with a velocity of 1.5). You might detect some assumptions in this sentence so I’ll admit the goal here is not necessarily precision (in the absence of great information, assumptions will do). The goal is strategic/conceptual level information. So if ETH expanded to that $167B value (market cap), each ETH coin would then be worth $1750. I think the fact that this would be a 480% increase from its price today is enough evidence that this is a pretty tall order (nothing is impossible, but some things are difficult to imagine).
The Bitcoin, on the other hand could realistically start to take on this task with a more realistic price movement. As of this writing, the Bitcoin’s market cap is $115B. To grow large enough to be used in Catalonia as the national currency, the Bitcoin would need to grow to a cap of $167B (an impressive 45% from today’s value). This is imaginable.
Of course I’m ignoring all of the political, social, and technological sides of this issue. Further, I'm ignoring the fact that these valuations exclude all of the currently adopted use cases for these currencies. More realistically, the Bitcoin would maintain its current value (right now $7k) and add on the hypothetical value: pushing it up to $17k.
I've long thought it would be useful to find a valuation formula that could be applied to cryptocurrencies. Especially, I'd like to know the right value of the Bitcoin. (Much in the same way investors value a company.) So far as I can tell, the world of cryptocurrency speculation is for technical traders only. (A fact, as a skeptic, I find troubling.) This entry on the value of BTC is part 2 of a series on my attempt to find such a formula. Here is Part 1: International Trade. Please follow me to continue to read my posts.
I’m Tyler (steemit.com/@tylr). I’m a husband and a father (of 7) working full time as a firefighter paramedic and I’m a part time graphic designer, web designer, pig farmer, crypto speculator, and writer. I love Jesus (if not religion), liberty (to a fault), education (if not the education system), big families (esp. mine), good food (and coffee), fascinating discussions (productive or not), and adventure (in strange forms). I’m writing this blog because I feel that I have a great deal of interesting things to talk about. I’ve waited longer than I should have because I’ve been concerned writing about so many topics would not work (we will see whether or not I was wrong). All of what I post is carefully created original content. If any of these topics are interesting to you, please follow my blog and feel free to make requests. Thanks for reading.
