What is Bitcoin worth Value of Bitcoin bit coin - How to value Bitcoin
Bitcoin Valuation Payment transfer system and alternate currency. One of my business associates asked if my unique valuation system could help to determine the value or non-value of Bitcoin. As the Bitcoin phenomenon was of great interest to me, I thought "yes" I will apply my valuation principles and see what develops. Note that I use these principles to value small businesses up to twenty million dollars. I also use these principals to evaluate small public companies that I buy and sell. So here is my disclosure. I bought Bitcoin after applying my Valuation Principles and I would still buy more. No one should use this as investment advice as I am not a licensed investment adviser in any jurisdiction. My reason for making this public is to prove my ability and the value of my system so people should want to hire me to evaluate businesses or intellectual property. My contact info is at the top. I came to a conclusion that Bitcoin in my opinion was going up in relation to the dollar. I decided to buy some Bitcoins on April 2, 2013 when the price was at about $100 Canadian. I was not able to get my order filled until April 6th in the afternoon. I was filled at $155 Canadian. Two days later Bitcoin was up to over $200 Canadian. I won't take money from my tax free savings account but I will liquidate some things I don't need and buy more Bitcoin. I believe it still has a long way to go up. My feeling is that Bitcoin will easily, and soon reach $500 or $600 against the USD in exchange value. Could they reach $1,000? - Probably. Could they reach $4,000 or $5,000? - Maybe. Could they in 24 months reach $10,000? - Perhaps. Could Bitcoin be ever be worth $100,000? Possible but it is also possible for the Bitcoin to be a footnote in currency and Internet history two years from now. Let us put this into perspective. Andy Bechtolsheim gave Google $100,000 seed funding that was later worth 1.7 Billion. 100,000 invested early in Google turned into 1,700,000,000 That is 17,000 x $100,000 = $1,700,000,000 SEVENTEEN THOUSAND TIMES HIS ORIGINAL INVESTMENT. When is early? Google had early investors as we noted who received as much as 17,000 times their money back. Later, In 2004, Google went public. The shares were priced at $85 in the original IPO and were over $100 on the first day of trade. Within 4 years they were trading at about 8 times the original IPO. Eight times a $200 Bitcoin = $1,600. Surely you are not going to tell me the algorithms in Google are superior to the well designed and thought out, functional Bitcoin? Could Bitcoins become worth 50 times what they are now? =
$10,000 EACH The biggest thing that Bitcoins do is educate people on how currency is issued. The interest in Bitcoin makes people look at USD or EURO and how these fiat currencies are issued. Upon comparison the Bitcoin looks strong while the fiat currencies of the world look rather suspect; as if they had been created out of thin air with nothing more than countries saying "TRUST US". After what happened in Cyprus many people are willing to trust the Netizens of the world far more than those printing USD and EURO. Is the Bitcoin going to make more change in the world than Google? One could certainly make that argument. Alta Vist, Yahoo and Excite were search engines who offered the same function as Google. Google did it a little smarter and captured the market. Imagine what Bitcoin can do. Bitcoin has no rival and it would be hard to launch a rival that could have enough market share to gain "critical mass" If a private company were to launch it would meet resistance as nobody wants someone controlling the system. Getting another grass roots system to start and grow would seem unlikely. One should not judge the possibilities for Bitcoin without examining the virtual world; the games and economies that exist within it. There exists a large virtual world out there called SECOND LIFE (and others.) As businesses compete in the real world, they also compete in virtual worlds. Many companies and organizations now incorporate virtual worlds as a new form of advertising. An example of this would be Apple creating an online store within Second Life. Sun Microsystems have created an island in Second Life dedicated for the sole use of their employees. This is a place where people can go and seek help, exchange new ideas or to advertise a new product. But fraud also exists in virtual worlds. An example is that of Ginko Financial, a bank system featured in Second Life where avatars could deposit their real life currency after converted to Linden Dollars for a profit. Players who bought into this are thought to have lost $700,000 USD. You may want to check the link below to find out more about virtual worlds and games. http://en.wikipedia.org/wiki/Virtual_world. There is an old saying, "People vote with their wallets." The Bitcoin virtual currency is valued at over "TWO BILLION" (April 9, 2013 in USD) Few people consider it to be a game. USD, EURO and other FIAT currency worldwide is estimated to be THIRTY THOUSAND BILLION if measured in USD (Thirty Trillion) After Cyprus and when people look at how the USD is being inflated by money being printed seemingly out of thin air. Why wouldn't people want 5% of their liquid currency in a currency they might actually believe to be liquid like Bitcoin. I am not suggesting 5% of assets in Bitcoin; I am saying 5% of the thirty trillion currency held on deposit worldwide. This would not of course include assets like houses or cars or buildings or oil wells or ships or airplanes or shares in companies or roads or bridges. If just 5% of the worlds economy were to be converted to Bitcoin we could estimate the value of Bitcoin to be 750 times what it is today = $34,500 Not quite the 17,000 times the first investor in Google received; but still substantial. Just so everyone can be on the same page I will outline my Valuation Principles. I consider business valuation from four distinct viewpoints:
When I start asking questions it is broken down farther: (1) Why: - Why do you want a valuation? (2) Who: - You want to know the value of the business; but this leads to a lot of questions: With whom owning and managing the business?
(3) Normalized Net Income: - I must understand the questions to ask to be able to determine the real "Normalized Net Income". Seldom is this what you see in the year end accounting; which is generally done to determine the least tax legally payable. Owners and families are often overpaid or underpaid depending upon individual tax situations. What would the owner have to pay someone to fill his/her position in the business? There are about twenty more normalizing questions that must be answered and these can be different depending upon the answers given to previous questions. This is where experience counts. (4) Leasehold improvements: These need to be covered regardless of whether the building is leased or owned and the right questions must be asked in any comprehensive appraisal. (5) Hard Assets: Determining fair market value. Book value means nothing if we want to know the true value of the restaurant business. Business Equipment Business Inventory (6) Intellectual Property: Copyright, Proprietary Processes, Business Operation Manuals. These are your operating manuals; the step by step instructions on how to run your business and how to train others to operate your business. This greatly affects value; positively if it you have them and negatively if you don't have them and much more negative if it would not be possible for you to have a practical manual that would allow for your business to continue if you were unable to function. (7) Business Succession Plan: Do you have a business succession plan in place? Who would take your place and how would they be trained. (8) Soft Assets: Do you have intellectual property that has fair market cash value outside of your business? (9) Risk:
(10) Value of Cash Flow: This is calculated by finding the normalized net income then multiplying it by a ratio determined by risk, opportunity, and the intellectual property affecting the means to produce the cash flow. ERIC JORDAN -
PRESIDENT BITCOIN VALUATION The reason for the valuation is "because I want to know" and I want to prove that my valuation system is robust enough to value almost anything, including Bitcoin. I have always stated that comparable sales are not the best way to determine business value, with some exclusion; Franchises like McDonalds where there is a long track record of sales and the risk can be easily determined. Currency is not a business. A currency not backed by gold or silver or some other physical asset is considered to be backed by confidence in the system. The USD is backed by confidence. The Euro and all other currencies I know of are backed by confidence. We have confidence??? Perhaps one should say "cleanest dirty shirt" Bitcoins are produced by a computer encryption of numbers and letters and can be exchanged in an almost free, peer to peer, setting; as simple as sending an email. Here is an address where you are welcome to send donations: 12WE6G5BXo3Sn7RhK4UMj6S8EYpYvQkdDj History: The early stages of Bitcoin was about the encryption and building the blocks of encrypted strings. Early adherents "mined" the Bitcoins easily as the early units were cheaper and faster to produce. Costs will go up constantly until the last of 21,000,000 Bitcoins are produced in the year 2140. Naturally a large part of the Bitcoins are owned by a small group who were in early; Similar to a stock company where the founders own much of the stock. Early people buy in for just a few cents or dollars, then if company stocks are in demand, they go up to hundreds of dollars. Google was one such example. Andy Bechtolsheim gave Google $100,000 seed funding that was later worth 1.7 Billion. When is early? If now is still early, a $5,000 investment would net you over 300 million at the same rate of return. I stress the "IF" Netizens; the Internet citizens who are the buyers, sellers, users, investors and miners of Bitcoin are the people in control. Their level of acceptance, use, satisfaction, innovation, safety and comfort with this currency will set the value in a very transparent and honest way never seen before in the creation and use of currency. Detractors could say the Bitcoins are not real and therefore this is all an elaborate hoax. However Bitcoin currency does have value and purpose in the real world because it can safely and securely transfer funds at little to no cost. When Banks, Western Union, PayPal, and others transfer money for clients or merchants across town or across the world they are really doing the same thing as Bitcoin; "TRANSFERRING DIGITS". All parties are using encryption based on SHA-256 My research leads me to believe the Bitcoin encryption is stronger than that of the banks. WHY are we paying huge fees to transfer digits? Risk:
In a similar way users/owners of Bitcoins who are damaged by being denied or blocked from systems could potentially have reason to file class action lawsuits against the offending companies or governments.
Bitcoin is a huge piece of Intellectual Property.
The value is in the complicated
simplicity. Very clever indeed. Look at the market!
bitcoinwatch.com. Internet Search Engines - Do your remember when Alta Vista was the best thing going. Excite was okay but Alta Vista was the Cadillac. Then came Yahoo and then came Google. My question would be - Is Bitcoin the Alta Vista with Google yet to come? My feeling is that Bitcoin will
easily (and soon) reach $500 or $600 against the USD in exchange value. To put this in perspective: Notes and Working Papers. According to the Federal Reserve, there was $908.6 billion in the M0 supply stream as of July 2009 [source: Federal Reserve]. That sounds like an incredible amount, but think about it this way: According to the CIA, there were 307,212,123 Americans alive that month [source: CIA]. If you took all the cash and divided it up equally, each person should have about $3,000 in cash on them (or stuffed under the mattress). Obviously, there's some money missing, but there's an easy explanation for that: The Federal Reserve says that at any given time, between one-half and two-thirds of the M0 money stock of U.S. dollars is held overseas [source: Federal Reserve]. The rest of the money is held in bank accounts of various types, and the Federal Reserve tracks these funds in three different values known as the M1, M2 and M3 money supplies:
December 20th, 2004: "It's certainly nice to see a State recognize that the simple solution in this case is also the right solution," said Steve Simpson, a senior attorney with the Institute for Justice. "The Internet should be treated like traditional media; there's no justification for licensing publications of either type. We hope other states recognize this simple truth as well." The New York-based ForSaleByOwner.com filed suit challenging the broker licensing law on May 14, 2003, in U.S. District Court in Sacramento. The law required websites to spend years and thousands of dollars obtaining a real estate broker's license simply because they allow individuals to advertise homes for sale on the Internet and they publish information of interest to buyers and sellers. In early 2001, the California Department of Real Estate began vigorously enforcing the licensing law against "for-sale-by-owner" and classified advertising websites that allow individuals to buy and sell homes without a real estate broker. The Department enforced the laws arbitrarily, requiring independent websites to get a license, while exempting newspapers and other print publications. The Department of Real Estate even said during the course of the lawsuit that websites cannot claim it is "easy" to buy and sell homes without a real estate broker or publish other information with which officials disagree. But on November 18, 2004, Federal District Judge Morrison England ruled that the distinction between newspapers and websites was "wholly arbitrary" and violated the First Amendment guarantees of free speech and freedom of the press. The court found the State's effort to justify the distinction "totally unpersuasive." "[T]here appears to be no justification whatsoever for any distinction between the two mediums," the court stated. "Even if a distinction was warranted in 1959, when the [newspaper exemption was passed], that does not mean that the same rationale for exempting newspapers remains viable in 2004, given the vast advances in technology that have occurred in the meantime." "This is an important case with broad implications for e-commerce," Simpson said. "Information is more important to the economy than ever before, yet government remains a serious impediment to its free flow and the economic benefits it promises. States clamor to tax Internet businesses, they erect barriers to e-commerce, and they pass laws that favor local brick-and-mortar businesses at the expense of Internet competitors. These laws harm businesses and consumers, stifle innovation, and perpetuate wasteful and antiquated business practices." The victory to strike down California's real estate licensing law was especially important for the Institute for Justice because the court relied upon an earlier IJ legal victory. In that decision, the U.S. District Court for the District of Columbia held that the Commodity Futures Trading Commission could not require licensure of online and software publishers who offered opinions on commodities. This victory by the Institute for Justice was the first federal court case to extend First Amendment protections to Internet publishers. Chief Operating Officer of ForSaleByOwner.com Colby Sambrotto said, "Today marks a victory for us, but the real winner is the consumer. This case was about empowering consumers to take control of their own real estate transactions, and we're eager to continue helping them do that." News Releases April 9th, 2013
CIOs Watching Bitcoin
Evolution
Inside the Bitcoin Bubble: A Q&A With
BitInstant's Stressed-Out CEO
Will Bitcoin Be A
Facebook Or A Myspace? Either Way, It's A Revolution.
Bitcoin mining
malware spreads on Skype as price rises
Bitcoin Market Not A
Bubble And Still Highly Undervalued
Electronics store accepts bitcoins
Bitcoin
Fervour Goes
Viral
Skype trojan forces Bitcoin mining, security
firm warns BBC News News March 29th, 2013
Bitcoin prices surge post-Cyprus bailout
Expensify Brings Bitcoin to Main Street
Bitcoin Exchange Mt. Gox Targeted by Cyber Attack
Digital 'Bitcoin' Currency Surpasses 20 National Currencies in
Value
Major Bitcoin Exchange Slammed With Denial of
Service Attack as the Currency...
Cyprus Crisis
Boosting Bitcoin
What Is Bitcoin, The Newest $1
Billion Currency?
How Bitcoin Could Destroy
the State (and perhaps make me a bit of money)
Bitcoin: The Digital Kill Switch
Bitcoin,
the Currency of Anarchy |