High Flyers and Frequent Flyers

Today the website coinmarketcap pegs the value of all Bitcoins in circulation at about $190 billion. While many compare this figure to the amount of gold outstanding, or currencies, or GDP, perhaps the better analogy is to the original tradable virtual currency:  frequent flyer miles.

American Airlines had about 850 billion frequent flyer miles outstanding within the past two years, so perhaps there are slightly more now. At the high end, the rule of thumb for valuation is 2 cents/mile or slightly less. That metric would imply a “market cap” (by analogy to Bitcoin) for American Airlines Frequent Flyer Miles of about $17-20 billion.

The current circulating supply of Bitcoins is about 17 million BTCs. But the American AAdvantage program alone has 80-90 million members. So there is a much larger American Airlines installed base of frequent flyer mile holders out there than there are Bitcoin holders. Sounds like executives at American have an obvious trade in front of them.

If American converts their frequent flyer program into a blockchain platform and limits future supply, it seems likely there will be a tremendous valuation pop to each FF mile. The market cap of American Airlines stock is only $24 billion, about 1/8 of Bitcoin’s market cap.

What do you say, American? Sounds like it could be worth a flyer!