The case for bitcoin at $100,000

If bitcoin really is Gold 2.0, the digital currency could push gold prices down to $300 an ounce and bitcoin could rocket up to $100K.

The Winklevoss twins went on the record on Nov. 12 saying they believe bitcoin could hit a market cap of $400 billion. At the moment, there are nearly 12 million bitcoins in circulation, that would make them each worth $33,333. And that’s the Winklevoss’s “conservative” estimate.

“The small bull case scenario is a $400 billion market cap. So the market cap is around $4 billion right now,” Tyler Winklevoss said in an interview at the DealBook conference that aired on CNBC’s “Squawk Box.”

Their “small bull case” is $400 billion. What’s their “big bull case?” The Winklevoss’s don’t say, but they do argue that bitcoin shares a lot of similarities with precious metals.

“Some people definitely view it as Gold 2.0,” Tyler says. “As a store of value, it definitely has the properties of gold and people are viewing it that way.”

So, let’s take a peek at the investment markets in gold and silver to see if we can get a sense of just how big the bitcoin market could grow. According to the World Gold Council, the total investment market for gold stood around $1.2 trillion in 2010.

The gold council also shows that investment demand for gold GREW by roughly 1,483 tonnes between 2008 and 2012. With gold averaging $1,100 an ounce over that period, we can say the investment market for the yellow metal grew by $52.2 billion or just over $10 billion a year. That means that by now, the gold market’s worth $1.5 trillion at 2010’s much-lower prices.

I can’t find great numbers on the total size of the silver investment market, but I’ve seen rough estimates that say the silver market is about 1/60th the size of the gold market. That would put it around $25 billion. So, the combined gold and silver investment markets are worth somewhere around $1.75 trillion. If 25 percent of that cash moved into bitcoin, we’d see that “small bull case” the Winklevoss brothers talked about. On top of that, gold would be trading around $970 an ounce (a price we last saw early in 2010).

Let’s say bitcoin really is Gold 2.0 and prices for gold tumble back to $300 an ounce – a level where the metal languished for some 20 years from the mid-1980s to the early 2000s. In that case, $1.3 trillion would flow into bitcoin. If that happened today (and there were only 12 million bitcoin in circulation), each bitcoin would be worth $108,000.

Of course, things get even more interesting when you consider the fact that if bitcoin truly is here to stay, everyone’s going to want some to make purchases and payments, so the market could get even larger. There you have it; the case for bitcoin at $100,000+. Please note that this is NOT a price prediction or forecast for bitcoin. It’s just a hypothetical “what if.”

Interested in learning more? Check out my post on How to buy bitcoin.

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