And a Bitcoin Is Now Worth...

Be careful with your price comparisons.

The Future of Crypto-Currencies

With a 94 percent year-to-date gain, and a single "coin" now worth $1,843, bitcoin has been on a helluva run lately. 

The increase in the cost of the massively-volatile electronic tokens has led to many comparisons with that other favorite outsider "currency'' — gold — recently.

True, a unit of bitcoin passed the dollar value of one troy ounce of gold this year, and is now more than $600 higher. 

But the daily swings in the digitally created asset have been vast. Even during the huge run up this year, it has moved more than five percent on 21 different days, with nine of those being moves lower. Gold on the other hand, has been much more stable.  

Volatility aside, there is a major problem with gold as a comparator for the software-based unit. 

Nobody thinks comparing one share of Apple Inc.  — current price around $155 — with one share of, for example, outdoor lighting company Acuity Brands Inc. — current price around $178 — is valid. It certainly does not show that Acuity, with its market cap of $7.9 billion, is worth more than Apple's market cap of $814 billion.

By the time the supply of new bitcoins ends, sometime after the year 2110, there will be 21 million bitcoins in (digital) existence, meaning the total value of all of the electronic tokens that will ever exist, at today's market price, is just under $39 billion. According to the World Gold Council, total gold stocks amount to approximately six billion troy ounces, or $7.3 trillion at today's price.

To put it another way, in order for bitcoin to be worth more than gold, one 'coin' would have to trade at $347,000 in order for 'bitcoin worth more than gold' to be a defensible statement.

Must dash now, one bitcoin is about be worth more than one aluminum future...

(Corrects spelling in first and fourth charts.)

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