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Category: economics – Page 172

In an April 2014 article, I demonstrated how one might approach a fair Bitcoin valuation.

  • Original Methodology: What fraction of the daily float
    needed to support daily global commerce will Bitcoin capture?

My methodology was based on the demand that Bitcoin would generate if it displaced a small fraction of cash and credit used for retail and commercial payments around the world. At the time, Bitcoin had a value of USD $450. I estimated that if it captured 5% of global payments, it would have a fair value of about $10,000/BTC (I didn’t complete the calculation—I left that up to the reader. That’s because I was concerned that publishing such a prediction would cause me to lose credibility as an economist and blogger. For what it is worth, I also predicted that a rise to $10,000 would take 5~8 years.

As you might imagine, my friends and family urged me to unload my BTC investment. The April 2014 price of $450/BTC seemed very high to most armchair analysts. After all, thirteen months earlier, it had been just $45.

Yet, now, just 2½ years later, Bitcoin has reached $18,000 per coin. Last week, on Dec 7, 2017, it climbed 40% in just 40 hours, and 120% in less than 2 months. Naturally, this leaves everyone asking if Bitcoin’s rapid rise in value represents an investment “bubble”.

…And so it is time to update the calculation of a fair value for Bitcoin. I can’t do better than point to a terrific prediction model described by Divyanth Jayaraj. His answer to a question at Quora presents a sound basis for valuation—much better than my original valuation method. How so?…

  • Reserve Methodology: What fraction of int’l business will be
    settled with the transfer of Bitcoin instead of Gold or Dollars?
Divyanth Jayaraj

Bitcoin is rapidly demonstrating viability as a reserve rather than a daily transaction currency. Few people believe that Bitcoin will replace national currencies throughout the world, but it very well may replace gold for government and interbank settlement, and for large intercontinental purchases of commodities, such as oil, grain or airplanes.

Sure! When developers and miners get a handle on transaction cost and delays, it may also become a de facto instrument for retail payments and debt settlement even among consumers. But, even if Bitcoin never achieves this status, Divyanth’s excellent analysis is still valid.

I won’t steal the author’s thunder. Click the link and learn what is very likely to be a fair future value for Bitcoin. Prepare to digest a very large number. I didn’t think of this valuation methodology, but I agree that it represents a realistic peek into the future.

For a few other methods of determining Bitcoin’s inherent value, check out the links at the bottom of my original article. But that was then and this is now. Give extra weight to this newer analysis. The methodology is more accurate given what we know now.

Philip Raymond co-chairs CRYPSA, publishes A Wild Duck and hosts the Bitcoin Event. He was keynote at Cryptocurrency Expo in Dubai. Click Here to inquire about a presentation or consulting engagement.

That might not be a bad thing.

V isitors to Henn-na, a restaurant outside Nagasaki, Japan, are greeted by a peculiar sight: their food being prepared by a row of humanoid robots that bear a passing resemblance to the Terminator. The “head chef,” incongruously named Andrew, specializes in okonomiyaki, a Japanese pancake. Using his two long arms, he stirs batter in a metal bowl, then pours it onto a hot grill. While he waits for the batter to cook, he talks cheerily in Japanese about how much he enjoys his job. His robot colleagues, meanwhile, fry donuts, layer soft-serve ice cream into cones, and mix drinks. One made me a gin and tonic.

H.I.S., the company that runs the restaurant, as well as a nearby hotel where robots check guests into their rooms and help with their luggage, turned to automation partly out of necessity. Japan’s population is shrinking, and its economy is booming; the unemployment rate is currently an unprecedented 2.8 percent. “Using robots makes a lot of sense in a country like Japan, where it’s hard to find employees,” CEO Hideo Sawada told me.

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Canada is testing a basic income to discover what impact the policy has on unemployed people and those on low incomes.

The province of Ontario is planning to give 4,000 citizens thousands of dollars a month and assess how it affects their health, wellbeing, earnings and productivity.

It is among a number of regions and countries across the globe that are now piloting the scheme, which sees residents given a certain amount of money each month regardless of whether or not they are in work.

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At the end of October, I delivered a keynote speech at the Cryptocurrency Expo in Dubai. That was just 5 weeks ago. When I left for the conference, Bitcoin was trading at $6,300/BTC. But in the next few weeks, it reached $10,000. Last week, I liquidated part of my investment at just under $13,000/BTC. Now, Bitcoin is about to cross $16,000. (I began writing this 10 minutes ago…but it has risen another $1600.00. Now, it is $17,000).

Dear Reader: I believe in Bitcoin. Yet, there is a “But” in the last paragraph below…

I believe in Bitcoin. Its rise is not fueled solely by investor hysteria. Rather, it is a product of delayed appreciation for a radical, transformative network technology.

In the mid 1970s, the microprocessor was spreading to every consumer gadget. It started a trend toward tools that added power and enjoyment to all facets of life. And they were quickly becoming faster, lower-power, lower-cost and more ubiquitous. If you understood the potential of the computer chip before mainstream investors, you couldn’t really invest directly in the microprocessor. After all, it is a platform improvement. But you could come very close—You might have invested in Intel, Fairchild or Texas Instruments.

Jump forward 20 years: In the mid 1990s, the Internet was spreading to every class of citizen and to all corners of the earth. But just as with a computer chip, you could own a web site, but you couldn’t own a piece of the internet’s market potential. You can’t invest in an idea, unless you are the inventor and you hold a patent.

But, 5, 6 and 7 years ago, many individuals saw the future. They understood that Bitcoin is transformative. They recognized that—contrary to popular misconception—Bitcoin is backed by something more tangible than dollars, Euros and Renminbi. More importantly, it exhibits the potential to become the global reserve currency. And it continues to do so, even as internal bickering threatens its utility as a consumer payment instrument. That’s because It diverts liquidity away from gold and national FIAT. Ultimately, it forces governments to be transparent and accountable to its citizens. This is further reinforced by rampant inflation in countries around the world and a growing list of trading partners who seek alternatives to the US dollar.

But, just like real estate, the supply of Bitcoin is capped. No one can produce more. It’s the math, stupid! Even if you only realized this one year ago, you still would have reaped a 2000% return on your investment as of this morning. (I am cherry-picking here, but Bitcoin had just crossed $630 on October 20 2016).

Let’s be clear: This is not a dot-com bubble or a 17th century Dutch tulip bulb mania. It is far more comparable to the 19th century California gold rush. The only frenzy is to acquire a functional instrument that is still trading for far below par value—but with the strange caveat that hoarding retards liquidity and the ‘functional’ adoption that we need to sustain long-term value.

The Bottom Line

In the grand scheme of things, Bitcoin is still undervalued—even at $17,000/BTC. It will fall and it will rise, but it will certainly be valued higher years from now.

…But, I must admit that this sudden and urgent race into outer space is a bit unsettling. From an investor perspective, it is not rational to leave when I recognize that the exuberance is rational. Yet, here we are at $17,000. I am taking some bitcoin off the table—A bit of bitcoin.

Philip Raymond co-chairs CRYPSA, publishes Wild Duck and hosts the New York Bitcoin Event. He is on the New Money Systems board and led the Cryptocurrency Expo in Dubai. He frequently consults and presents.

Three new reports combine to suggest these answers: It can probably do less right now than you think. But it will eventually do more than you probably think, in more places than you probably think, and will probably evolve faster than powerful technologies have in the past.

Three new reports suggest that artificial intelligence can probably do less right now than you think. But by one estimation, up to a third of American workers will have to switch jobs by 2030 largely because of it.

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Ontario intends to provide a basic income to 4,000 people in three different communities as part of an experiment that seeks to evaluate whether providing more money to people on public assistance or low incomes will make a significant material difference in their lives. How people like Button respond over the next three years is being closely watched by social scientists, economists and policymakers in Canada and around the world.

Former security guard Tim Button considers how a sudden increase in his income from an unusual social experiment has changed his life in this Canadian industrial city along the shore of Lake Ontario.

Sipping coffee in a Tim Horton’s doughnut shop, Button says he has been unable to work because of a fall from a roof, and the financial boost from Ontario Province’s new “basic income” program has enabled him to make plans to visit distant family for Christmas for the first time in years. It has also prompted him to eat healthier, schedule a long-postponed trip to the dentist and mull taking a course to help him get back to work.

“It’s making a huge difference for me,” Button said of the almost 60 percent increase in monthly benefits he started receiving in October from the Ontario government.

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In this new Business Insider article, my ideas on peak labor and Universal Basic Income are pitted against MIT scientist Andrew McAfee. I’m excited to see my government shrinking Federal Land Dividend proposal getting out there. Story by journalist Dylan Love: http://www.businessinsider.com/will-universal-basic-income-s…?r=UK&IR=T #transhumanism #libertarian

Does free money change nothing or everything?

Universal basic income (UBI) is the hottest idea in social security since Franklin Roosevelt signed the New Deal in 1935, and it is fairly understood as free money given to citizens by their government. Though the idea traces its roots back to the 16th century as a “cure for theft,” UBI has gained new consideration and momentum these days, as high-profile techno-doomsayers like SpaceX founder Elon Musk point to it as an economic solution for big problems predicted to arrive soon.

The future is coming, Musk and his ilk warn, and it’s bringing increased automation and intelligent technologies with it that will eventually overtake the human capacity for work. All-capable robots will cause widespread human unemployment, goes the thinking, plaguing our income and livelihood for generations.

If the “robots are stealing jobs” on the level that the party line portends, then UBI presents itself as a compelling solution to this unusual, hypothetical problem. There’s already some real-world precedent for it: a UBI pilot program in Finland sees the government send a small amount of money to 2,000 unemployed Finns each month, and the initial results are quite positive.

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Most new companies fail. What does it take for young entrepreneurs around the world to thrive in a startup hub?

Click here to subscribe to The Economist on YouTube: http://econ.st/2A1ieeK

Over the past two decades start-ups have changed the world. Multi-billion dollar companies like Google, Facebook, and Uber have shown the transformative power of entrepreneurship.

Today, innovators dream of their idea becoming the next big thing. But the odds are stacked against them. In America alone, 80% of startups will fail. In startup hubs around the world young entrepreneurs are desperate to prove they have what it takes to succeed. But what does it really take to survive?

HoloMe is one of half a million companies to start up in Britain every year. The nations capital is a leading hub of innovation, inspiration, and creative energy. In London, and in cities world wide it’s the age of the entrepreneur.

Startups are championed by governments who see them as key to building a dynamic economy, but the competition is cut-throat. To succeed, you’ve got to really believe in your product.

Continue reading “Welcome to the startup jungle” | >

Somehow, some way, someone paid $450 million, after buyer’s fees, for Leonardo da Vinci’s Salvator Mundi at Christie’s last Wednesday. Believed to be the last work by the artist in private hands, the painting’s price smashed all previous records.

Since the price also seemed more on par with the education budget of a medium-sized country, Artsy asked a range of leaders from the arts, economics, bioethics, and development to tell us how they’d spend $450 million.

After last week’s recording-breaking sale of a Leonardo da Vinci painting, Artsy asked a range of leadersdevelopment how they’d spend $450 million.

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“Former Vice President and Chairman of Generation Investment Management, Al Gore, introduces PRI, UNEP FI and The Generation Foundation’s Fiduciary duty in the 21st century programme. The project finds that, far from being a barrier, there are positive duties to integrate environmental, social and governance factors in investment processes.”

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