Bitcoin Price Napkin Math – $15,882

Essentially, the equation of exchange is an economic equation that showcases the relationship between the money supply, the velocity of money, the price level and real output. The equation was derived by John Stuart Mill 150 years ago and is a staple in any Macro or Monetary Theory class.

MV=PQ

M=money stock

V=velocity of money

P=the overall price level

Q=real output.

We can first apply this to the US economy and apply some real-world numbers to this equation.

PQ= Fourth quarter, nominal US GDP in 2017 was 19.73. This is the 2017 price of goods and services produced within the country during 2017.

Next, how much money is needed to service that GDP?

M=According to the St. Louis Fred database, https://fred.stlouisfed.org/series/M2, we use 13.82 trillion dollars to service the 19.7 trillion dollars of output. They are using M2. Go way back to your college days and remember M1 is more or less cash and checking accounts and M2 is more or less your savings accounts.

Reference: https://www.ccn.com/bitcoin-price-napkin-math-15882/

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