It's called mark to maket accounting, for example suppose I have 2 Bitcoin and will like to know what is their value, I see the market price and multiply by what I have, like you said.

This is why people say that the current amount of bitcoin multiplied by their value makes more than $1 billion dollars.

EDIT: Of course, you can't sell it all by the current market price since supply will be then much higher than demand and price will go down

Evaluating assets based on "Market Cap" is a standard financial analysis technique. This is nothing more than the marginal value of a security (i.e. what it's trading for this very moment) times the number of shares.

You are right, the article uses sloppy terminology. You are also right that you couldn't actually sell all those bitcoins for $1bm. Nonetheless, this is standard financial language you have to take at face value.

> But... knowing that they are not underwritten or backed, surely they're only "worth" what somebody will pay for them.

I don't understand how this is any different from a fiat currency. The value of bitcoins are currently being quantified by its exchange rate in USD. Sure, someone could buy all BTC and drive its exchange rate (and thus its value) down. Someone could also print more USD which would create a mass inflation and the exchange rate would be driven up. The exchange rate of all currencies would all be driven up, and the value of USD would go down.

> someone could buy all BTC and drive its exchange rate (and thus its value) down

If someone buys it like crazy, why would the price go down?

> Someone could also print more USD...

The use of the word "also" here is wrong since btcs can't be "printed" by "someone" like the dollar.

> If someone buys it like crazy, why would the price go down?

If someone has all the bitcoin in the world, why would anyone want some?

You couldn't... All the money in the world wouldn't be enough to accomplish this.

Really, I'm not sure it's that different than a commodity commonly held principally as a store of value.

It's the same type of gamesmanship that explains why Facebook was worth 100B at one point: the marginal price is multiplied by the number of units outstanding. There is no guarantee that every BTC can be cashed out at the current price (or even for a nontrivial price) in much the same way as how Dorsey can't dump his entire twitter stake at the current valuation of twitter.

> Nobody would pay $1BN for all of them, because that would render them all worthless

Not to nitpick, but do you mind elaborating on how so? As long as there's still demand for bitcoints, you could argue that they are worth approx. infinitively more.

Bitcoins will still be a scarce good. The demand will determine if they're worthless.

A recent (perhabs a bit far fetched) example of this is the bad loans in CDOs. Although they were rendered worthless, they increased in value because those who had insurances on the value of CDOs going bad, still had to buy the actual CDO in order to exchange it for cash. This happend because more insurances existed at AIG for the CDOs, than actual CDOs - thus an increase in demand at fixed supply so to speak.

Look at it this way: You print 1 billion klapinat0r bills. You're the only one who owns any and they're not backed by any other asset such as gold. What would one of those bills be worth? Why would it be worth anything? Why would there be any demand?

That's assumes you are starting from no one having any to one person having them all. If someone had 1 billion in demand for bitcoins it would drive the price up, some would sell hoping to cash out, but others probably more would save seeing this big new interest as a sign of increasing value. You can't count out the sociology and the theater of it. Or other external forces like unstable/untrustworthy national currencies, or the value of relative anonymity.

I'm not saying there is, I'm saying there could be.

Say I owe money in those bills for instance :)

It would then be up to the owner to figure out how to make them valuable and I suspect the owner would have a very difficult time. With only one owner, there could be no trading and hence, no market value.

Perhaps "market cap" is a better word.

Same things are true for any currency, this is partly why they work. We can trust because we have common interest in the solvency of any commonly used currency. A dollar is only worth what someone will give you for it.

"A dollar is only worth what someone will give you for it."

Dollars also have value because they can be used to pay taxes and settle other debts in the United States. It is not like people woke up one morning thinking that the US dollar was a great currency to use; it has actual utility.

>How is it possible for the "value of all the bitcoins in the world" to be anything, in truth?

Only because you can sell/trade it.