Keith's Interweb: Bitcoin Update

Based on its historical value trend, bitcoin is today 13% undervalued. As shown in the first chart below, the 7-3-2014 traded value on the Bitstamp exchange is $646 while the historical trend projected value is $743.

Over the past 3 years bitcoin value has, on average, gone up 4.1% per week. If its value continues to rise at this rate then by EOY 2014 bitcoin will hit $2061.

Since January, 2014 bitcoin shows improved stability - this is a good indication that it's on the path to becoming a real currency. The data in the second chart below indicate bitcoin's EOY 2013 bubble was smaller than its other major bubbles in 2011 and in early 2013. Over the last 5 months the week-to-week change in bitcoin value has been no larger than 20% and has averaged 7%.

The third chart, just below, shows that the number of bitcoin transactions is, like bitcoin value, also growing exponentially - at the pace of about 6x increase per year. If this trend continues the volume of transactions using the bitcoin currency will by the end of 2016 be nearly 1/5 the size of the US GDP. Also shown in this chart (the green line, scaled on the right axis) is the trend in Bitcoin currency exchange transactions. Exchange transactions are currently less than 10% of total bitcoin transactions. This is a strong sign that bitcoin is moving in a good direction - toward becoming more a currency and less a commodity.