One of the main criticisms that some people have against Bitcoin is that the value of bitcoins is not exactly stable. Although the price of a single bitcoin was able to climb from around $10 to over $1000 over the course of 2013, the reality is that 2014 has not been that kind to holders of bitcoins up to this point. While short term speculators may not be enjoying this decline in the bitcoin price in early 2014, there are plenty of long-term investors who see this as nothing more than a buying opportunity. Anyone who is buying bitcoins to hold over the long haul realizes that getting angry at a $500 bitcoin price could seem quite comical in just a few years. Let’s take a look at where the bitcoin price could end up if Bitcoin really does start taking over the financial world.

 Don’t Look at Western Union or PayPal

One thing that needs to be pointed out before we try to find the future price of the bitcoin is that people should not be looking at Western Union, PayPal, or Visa for comparative market caps. Although Bitcoin is indeed a payment system, we are only really talking about the value of the units of account on that payment system. This means that bitcoins are competing with assets such as fiat currency and precious metals. The market cap of Western Union or PayPal really means nothing when compared to Bitcoin because bitcoins could still be almost worthless in a world where Bitcoin is only used as a payment system. When bitcoins are used as nothing more than a payment system, they are simply bought in one country and sold in another; there is no net increase for the price of bitcoins.

Bitcoin’s Market Competitors

If you’re going to try to put a price tag on the bitcoin’s future, then you need to look at the market caps of dollars, euros, gold, silver, and similar types of assets. For example, there is over $8 trillion worth of gold in the world right now. This is the kind of market that bitcoins could eventually disrupt over the long term. In a situation where bitcoins replace 5% of the world gold market, the price of a single bitcoin would rise to over $30,000. Remember, this is a situation where bitcoins are used as nothing more than an alternative to gold or silver. Bitcoin’s unique properties make it perfect for many different use cases, some of which haven’t even been invented yet.

The real fun begins when you start to think of the bitcoin as a replacement for fiat currencies. This is the most bullish scenario for the cryptocurrency, and it would put the value of a single bitcoin well over $1 million. At a certain point, what you can buy with bitcoins could be more important than its value in dollars or euros.

Are Altcoins a Problem?

Even some people who agree that cryptocurrencies are here to stay do not think that we’ll eventually see a ridiculous valuation for a single bitcoin. These individuals tend to think that some other altcoin is going to replace Bitcoin, or at least take a large chunk of the overall cryptocurrency market share. The problem with this argument comes down to the network effect. While it’s always possible for a better product to replace the first-mover in any industry, the issue with cryptocurrencies is that the larger market cap actually makes the product better. A more-widely used currency with a large market cap is also a less-volatile currency, so it would take something rather extraordinary to take down Bitcoin’s network effect.