The price of bitcoins could fall to a low level if there are not a lot of people that used it and they only used it for small transactions. If they were worth $1 each, then the maximum transaction would be about $14 Million and that is if they were all used in a single transaction. That is not possible, because many different people own bitcoins. In international trade, $14,000,000 is a very small amount. Currently, $35,000,000 trades hands in bitcoins every day. They would at least have to be worth $2.50 each to maintain that transaction volume. Not all bitcoins get traded every day. The entire price of all bitcoins is about $3,500,000,000. Only a small fraction of the bitcoins trade hands every day. A lower limit on the price of bitcoins would have to be enough to support the daily transaction price with the percentage of bitcoins being traded factored in. If they were priced at $1,000.00 each, then all bitcoins combined would be worth $14 Billion. Trading in foreign exchange markets averaged $5.3 trillion per day in April 2013. If Bitcoin could grab even 1% of the market, then the price will should go up much higher than it is.
For large organizations or individuals that want to trade a billion or more dollars worth of bitcoins, then they would either have to buy about a quarter of all bitcoins in circulation at the current rate. If wealthy individuals wanted to own bitcoins to transfer or store wealth, then the price would have to go up. I don’t think it is unlikely for the price of bitcoins to go back up near $1,000 in the not too distant future based on how much trade happens every day in the international community and how much in transaction fees people could save.
I’m not sure if using the $5,300,000,000,000 is correct or it includes extra items that should not be compared to exchanging bitcoins without further analysis. Also, the actual number might be higher because this may not include every single trade between every single person on the planet in a given day. There is no way to record that as of now. Possibly in the future, all transactions on our planet would have to be recorded by some international law or treaty. That would be hard to control unless if all transactions had to be done electronically and linked to an identity.
With the liquidity of bitcoins and the continued mining, I’m not sure it is going to skyrocket too high. Most companies just sell the bitcoins as soon as they receive them. Maybe that will change if the price keeps going up, but it is too much of a gamble for a large company to hold onto the bitcoins unless if they have plenty of cash reserves to cover the potential drop in the price of bitcoins. I think the cost to mine will stay aligned with the price because why would someone pay more for bitcoins when they can pay less to mine them and the other way around, so the two should stay pretty close together. And, there is only so much hashing power being created every month so the price could surge more in the short while hashing power surges will be more long-term.
And, the blockchain tech is really about proof of existence – a hash of a document can be stored on the blockchain to prove that it existed at a certain time. The more valuable the documents that get put on the blockchain, then the hashing needs to be greater to ensure that they are secure and that will bring up the price. I don’t see it happening that quickly, but I might be very wrong. A huge surge of newcomers coming in could increase the demand so much higher than the supply, that the price will have no choice but to go up. Mining hardware would be out of stock if that happened since it would technically be cheaper to mine it than to buy it. It will be an interesting ride watching all the variables interacting with each other.