As I write this, a Bitcoin now costs over 400 USD, giving a market cap of $5billion.

I am told that Bitcoin has a limited supply, and I have to take that as fact because I do not have the skills to investigate. In the same way that buyers of gold or diamonds are told they cannot be manufactured. If tomorrow it turns out that gold can be printed out of milk and charcoal then the gold market will tank.

If we ignore that risk, then we ask what Bitcoin’s market cap could feasibly be.

Bitcoin will take some chunk of the following markets -

Drugs

The annual value of the drugs market was estimated at $321bn in 2003 But estimating on such an enormous scale is unlikely to be accurate, let’s look locally… Scotland’s drug market was valued at £1.4bn in 2009.

Now Bitcoin is suitable for some drug transactions - end-user purchases by mail-order, and also potentially for wholesale purchasing and transfer of money. £250,000 in cash takes a holdall to move so there is obviously an appetite for alternatives in wholesale transactions. The €500 note is also much harder to use now in Europe, which was the cash of choice or anything over £100k.

40% of Scotland’s drug market is estimated to be heroin. I think these end users will never have access to, or use Bitcoin. Even now they don’t have credit on their mobile phone (if they even have one).

Prostitution

Unlikely, but possible. Adultwork is transacting tens of millions of dollars of business in the credit card system. It can’t be long before they are slapped with some regulation and forced into the Bitcoin system - at least for payouts. Clients and service providers may also prefer this as it keeps transactions off bank statements. Personal services will still be cash though.

Dark porn

There can’t be any doubt that Bitcoin is already the currency of choice for child porn and other deep underground sexual business. I don’t know what the value of this economy is, I don’t think it can ever be known. It must be in the hundreds of millions of dollars though.

Blackmail, ransomware and extortion

Receiving ransom by Bitcoin has to be a textbook use case. Plus this sort of business is 100% profit and so BTC exchange rate fluctuations are less of an issue than in business with slimmer profit margins. This could be kidnapping, piracy, straightup blackmail, and ransomware. Analysis suggests that just one ransomware operator was clearing $5m per year, this is going to balloon as bitcoin becomes more mainstream and a higher percentage of users pay up.

Black hat economy

The black hat hacking world will be fueled by Bitcoin. What’s it worth? No idea. DDOS attacks, spamming, virus creation, day-zeros , botnets, click-fraud. That has to push us into the billions.

Money transfer

Right now, transferring $1,000 USD to the Philippines via Western Union will cost 3% after currency spread and fees. I can see a future for Bitcoin here, but not while the exchange rate is so volatile. Bitcoin varies by 3% every hour. A more stable currency though and it becomes a real alternative.

US online gambling

Previously hundreds of millions of dollars.

eCommerce

The widespread use of Bitcoin for anything other than 90%+ profit businesses is going to depend entirely on its stability. No-one wants to be selling physical goods for a currency that falls by 10% in a day. This isn’t so apparent in the current environment where Bitcoin is clearly trending upward.

__I think that assuming Bitcoin retains its integrity, it’s market cap will be in the hundreds of billions of dollars. That is to say, at least 20x what it is today. __ However, I think the likelihood of technical issues with Bitcoin to be between possible and probable.