What are bitcoins, everybody asks. The usual answer is “they are a distributed, semi-anonymous, peer to peer, cryptographic digital currency” or something along those lines, but there is another simpler way to look at bitcoins.
Bitcoins are a tech stock – tech because they solve a technological problem and have a technological use, and stock because they can be bought and sold on open market.
Imagine a startup arrived in silicon valley one day and said they were going to create a digital currency which would succeed. A digital currency that overcomes the many limitations and fatal flaws of all its predecessors. I wonder how we could quantify it’s value in terms of VC funding, and once it reached a market cap of $300 Million, its value as an acquisition?
Let’s look at three start ups who received over $100million each in VC funding.
Dropbox has received over $250 Million in venture capital funding, for a service that essentially stores files. AirBnB, a space rental service (generally for holidays) has received $119 Million in funding. HomeAway, a vacation property booking services has raised over $500 Million.
And let’s look at a few startups that have sold for over $1billion.
Instagram, a simple photo sharing platform, sold to Facebook for $1billion. Youtube, the video sharing site we all know and love, sold to Google for $1.6billion and Doubleclick for $3billion. Yahoo bought an internet radio service for $5.7billion, geocities (now defunct) for $3.6billion, Overture Services Inc for $1.6 Billion and various others. Microsoft purchased Visio software for $1.3 Billion, NaVision for $1.3 Billion, aQuantive for $6.3 Billion, Fast Search and Transfer for $1.1 Billion, Skype for $8.5 Billion and Yammer for $1.2 Billion
In the above examples I’ve listed 12 companies that were sold for a total of $36,200,000,000. Just 12 Companies!
And let’s not even talk about the tech stocks which have floated on stock exchanges!
All of these companies have one thing in common, commerciality. Each requires a monetary transaction of some description to have been worth investing in or buying, in the first place. Now imagine a technology which facilitates the commerciality of all trade.
The current market cap of Bitcoins is around $300 Million. If bitcoins are a more commercial, more versatile and more readily traded tech stock (and they are), I don’t think it’s far fetched for bitcoin as a tech stock to be worth more than instagram. In that case their value should increase by 330%.
In fact I don’t think its far fetched to suggest bitcoins are a more commercial, readily traded, versatile and also sustainable tech stock than all of the above combined, in which case they are under valued by 11900%. ie. They should be trading at $3284 per bitcoin.
In my mind it goes even further. Apple is a company that simply sells computers, phones and software, and its value peaked at around $650 Billion. I think this is a realistic market cap for Bitcoins to hit within 10 years, at a value per coin of $55,000 each.
Imagine again for a second that the general public could have invested and the ground level with each of the above companies, ala kick starter. With bitcoins they can, and what’s more, this investment is more secure, more liquid, and more useful than any of the aforementioned investments could ever have been.
Bitcoins aren’t just a digital currency, they are a tech stock