After the latest wild ride takes the poster child of cryptocurrencies above $ 40,000 before plunging a stomach churn, the million-dollar question will not disappear: how much is bitcoin really worth?
The virtual currency has been chartered to new highs to rise more than 400 percent over the past year, before promptly slipping about 20 percent and then settling about $ 36,000.
When it began its life in 2009 as open source software, bitcoin was essentially worth zero – albeit within a year it had reached the highs of eight cents.
At today’s market rates, fueled by a surge in institutional demand, the digital unit market capitalization is worth about $ 670 billion with a myriad of other crypto coins like ethereum raising the sector near the trillion mark at nominal.
Although that’s small potatoes compared to the $ 68 trillion or more bulking around the world’s stock markets, it’s nevertheless the kind of financial territory set out by Wall Street tech royalty like Google, Apple or Tesla .
One technology site, AssetDash.com, notes that bitcoin is currently worth as much as Facebook and slightly more than Chinese e-retail giant Alibaba.
Curse of the forgotten password –
While deep-pocket investors have recently become enthusiasts, crypto in its early days protected geeky amateur investors.
It is the latter that has suffered primarily as an estimated four million of the approximately 19 million bitcoin units currently in circulation have been lost.
“Missing” does not mean that the coins have fallen down the back of the sofa or through a hole in a trouser pocket: they have been zipped electronically from the record, often because their owner forgot a password for coins which are hooked on a USB stick.
One US developer misled his password after storing 7,002 bitcoin on one such flash drive, forcing him to wave goodbye, on paper (or rather, the trading screen), to about $ 280 million.
This week, Welshman James Howells desperately offered his local authority a quarter of his fortune to dig a landfill where he believes there was a hard drive that crashed away by accident – and has since increased in value to about $ 270 million – buried. The council refused, citing the cost and logistical constraints.
According to analysts at JP Morgan, bitcoin can be highly volatile but could go as high as $ 146,000 per unit, putting it in competition with gold as an asset class in terms of private sector investment.
That volatility, as well as the unregulated and decentralized nature of the bitcoin beast, are key reasons why many experienced financial observers are intimidated – as well as the risk of “losing” their stash.
“Most of the lost bitcoins were acquired in the early days,” said Philip Gradwell, an economist with Cainalysis.
Gradwell said about one in five bitcoins in circulation today has not budged from their location in five years – since days when the unit was worth little more than $ 100.
“A million or two million of those belong to Satoshi himself,” Gradwell added, referring to the creator of the penny, whose identity remains unknown.
He added that most investors are not day-to-day traders, but people who make long-term pounds – and estimates that last week’s spectacular price boom has only covered about five million units.
Patrick Heusser, head of trading at Swiss trader Crypto Broker, said following the trading volumes of a variety of cryptocurrencies, rather than just bitcoin, would give a better idea of how the market is booming.
“Ethereum has a lot of activity on the chain, but on the litecoin side almost nothing happens,” said Heusser, with the former currently priced at around $ 138 billion, and the latter at $ 10 billion.
Heusser suggested that the increases have largely been a bitcoin chip flow effect, and he cautioned against drawing similarities with gold.
“To be honest I don’t think it’s a very powerful or insightful metric inside what’s happening in the crypto market,” concluded Heusser.
After years of experience on traditional money markets, he judged it to be early days for the crypto equivalent.
“We’re still a small fish,” he said.
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