Komal Joshi · Oct 21, 2020 . 6min read
Bitcoin’s Purchasing Power Continues to Grow
Bitcoin purchasing power continues to grow. Today the same amount of bitcoins Laszlo exchanged for two Pizzas is worth $120 million.
By Victor Ugochukwu · Aug 10, 2020 . 7min read
Right from the days when Cypherpunks never thought so importantly of the Bitcoin they were mining, to the time when Laszlo Hanyecz bought two pizzas with 10,000 bitcoins, Bitcoin’s purchasing power continues to grow. Today, the same amount of bitcoins Laszlo exchanged for two Pizzas is worth $120 million. Can you imagine what $120 million can do today?
While you are still musing on the thought of what you can do with $120 million, Laszlo doesn’t have any regrets for parting away with 10,000 bitcoins for “just” two Pizzas, by the way.
If you’re not new to this space, you’d have seen how exciting memes fly around on what you can do with Bitcoin. Notably, not every one of them is sarcastic. In fact, Binance Research recently tweeted what appears like a meme on Bitcoin’s present purchasing power in 2020.
Binance calls it “a scientific study”. Anyone may want to argue as to the science behind the research as there was not any data to back that tweet. However, what one Bitcoin can purchase today comes with no question.
Surprisingly, as at the time of publishing this post, one Bitcoin is almost $12,000. This is particularly interesting when you compare the gains within just 12 months.
How do you calculate Bitcoin’s Purchasing Power?
Asides from the “Lambo” or any other thing you might be able to buy with your bitcoin, there’s a standard way of calculating Bitcoin’s purchasing power. This is technically called Bitcoin Purchasing Power Index – Bitcoin PPI for short.
Inspired by Economist’s Big Mac Index, Bitcoin PPI draws data from three primary sources. These are Big Mac prices, bitcoin exchange rates and macroeconomics data for each country included in the index.
As at today, you could buy up to 4,823 Big Macs with one Bitcoin. Equally, if you do the maths, one Big Mac costs around $5.71 today.
Additionally, the chart above shows Bitcoin PPI has been increasing amidst the periodic rise and fall within the years.
In conclusion, the Bitcoin price is tied to its hash rate of the network. Hash rate is the measuring unit of the processing power of the Bitcoin network. The Bitcoin network must make intensive mathematical operations for security purposes. When the network reached a hash rate of 10 Th/s, it meant it could make 10 trillion calculations per second. And that said difficulty level increased. Consequently, the cost of mathematical computations (mining) also increases, which means miners have to raise their fees to fall in the zone of profit.
With halving happening every four years subsequently reducing miners rewards, wild predictions as to Bitcoin price aiming for the “moon” may not entirely be dismissed as baseless. A limited supply of 21 million means many might want to own a piece of this digital gold. And if the law of demand and supply plays out, Bitcoin’s price will keep rising and increasing its purchasing power.
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