The value of Bitcoin compared to Gold

Bitcoin and cryptocurrencies based on its code are valuable assets that can become more expensive regardless of supply and demand, thanks to the functions embedded in them from the beginning. Time and scarcity is the main driver of the rate of these coins. Using simple examples from life, comparing them with the products of people close to us, I will tell you how it happens.

What product is familiar to absolutely every person and as a rule becomes more expensive every year?
Cognac. As soon as grape spirit goes into the barrel, its cost remains on par with regular alcohol. It is the aging that will make the spirit a premium drink. After three years of aging, such a drink can be sent for sale. But the rarity factor is quite low, so the price of this product is also low. This is so because, the policy of most manufacturers is built in this way - "make more, sell faster".

With expensive products of this class, things are different. Expensive cognac is often aged for ten, thirty and more years. Preparation, exactly expensive drink requires a lot of time. Time is necessary for the cognac to be tasty, not all producers are willing to wait a long time before they earn money on their product. Here arises the rarity and limited availability of this product, and as a consequence the high cost.

Price, scarcity and time are closely related, with these variables, the real value of any product can be determined.

Bitcoin is limited in quantity, a total of 21 million coins can be mined, plus it has a deinflationary property, thanks to the halving of the bitcoin code, which approximately every four years halves the number of coins mined. Miners, in order not to lose their income, are obliged to sell it more expensive and invest in more productive hardware to maintain mining volumes.

The properties described above, directly affect the final value of Bitcoin. It becomes smaller over time, more difficult to mine, the rarity factor is constantly increasing, so it is expensive.

Fiat money is the opposite example, its value is solely due to demand, it is not limited, the production of new bills takes little time, and therefore they can not be expensive, do not consider fiat money as an asset in which you can invest for the long term. "Let it be so" is exactly what the word "fiat" means, in simple words "it's worth so much - because it's agreed to be so".

Bitcoin is the new gold that operates under the rules of real physical gold.
There are 185,000 tons of physical gold mined in the world in total, 3000 tons are mined per year. Accordingly, if we divide one by the other, the result is a time ratio of 61.6. That's how many years it takes to mine as much as has already been mined.

If we take Bitcoin, it is currently mined 18 million 990 thousand whole units, a year is mined 328.5 thousand Bitcoin, which means that every day there is a war in the world for 900 coins mined per day.

Let's take this value of 18990 coins and divide by 328.5 we get 57.8 years, that's how long it will take to mine all the coins, with the current mining rules.

Proportion of rarity

Let's now try to calculate the proportion of the rarity ratios of digital gold to physical gold.
57.8 divided by 61.6 get 0.9383, then we need to multiply this proportion by the cost of one kilogram of gold.

62800$ (the cost of 1 kilogram of gold) multiplied by 0.9383, equals 58925$.

So we get the real value of Bitcoin calculated from the rarity coefficients, not taken from the market. For the first time, such a value Bitcoin acquired on March 13, 2021, after sharp jumps again returned to this value on October 15, 2021.
Surprisingly, the math gives us accurate predictions of how much an asset can be worth every 4 years when its rarity ratios double. Limitations and time do their thing.....

Below, in the attached image, I have provided a calculation of Bitcoin's value for the current time and the next 6 halwings.
Thank you for your attention and see you soon in a new article!
Peace and prosperity to you Friends!
Always your M.J.
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