The value of Bitcoin

Writing an article on how to value and what is the value of Bitcoin can be extremely complex or extremely simple. I will make a simple case here for everyone to understand.

At this stage of the life cycle of Bitcoin, thousands of articles have been written on the subject, thousands of discussions have happened and, being humans, we have come up with many different views and opinions.

"Fads don’t typically last 12 years. There are good reasons for this; reasons that every investor should hear. As we roll into 2021, we’ll be discussing the digital asset space more, its upside and downside."

John LaForge, head of real asset strategy at Wells Fargo, December 2020 talking about Bitcoin and cryptocurrencies

So Bitcoin has NO intrinsic fundamental value, use or utility or any other service. So it is a pure speculative manipulated "asset" & bubble with no fundamental value. It is not even an hedge against risk off episodes: every time stocks go down, bitcoin falls much more.

Nouriel Roubini, Stern School NYU Prof; Roubini Macro Associates CEO; @Nouriel Twitter, November 2020

It’s worse than tulip bulbs. It won’t end well. Someone is going to get killed.

Jamie Dimon, J.P. Morgan Chairman & CEO September 2017

Bitcoin could rally as high as $146,000 as it competes with gold as an “alternative” currency.

J.P. Morgan January 2020

It takes two to make a market so with that in mind I can confidently says that we can put to bed the question of price (not value) pretty quickly. The price of Bitcoin is the result of a simple supply and demand relationship.

Supply is the willingness of a seller to offer a given quantity of a good or a service for a given price.

Demand is the willingness and ability of a buyer to purchase a given amount of a good or service at a given price.

Put simply, if Bitcoin increases in price it means that there are more buyers than sellers. Bitcoin benefits from a unique characteristic - its supply is limited and fixed at 21 millions

For a regular good or service is conceivable that as supply increases, prices drop if demand doesn't increase proportionately.

For Bitcoin we are in a moment where not only supply cannot increase (with the exception of the newly mined Bitcoins within the maximum 21M available); we are also witnessing a strong increase in demand as institutional players are coming to the table, buying off the available float and putting into storage. There isn't really a better dynamic than this for price to increase.

Analysts, firms, individuals have been coming out with price predictions. As Bitcoin price increases, more interest is generated and more forecasts are put out.

In my opinion it is very difficult to even speculate what the ultimate price tag for Bitcoin will be, however my guide model has always been Plan B stock-to-flow model and its iterations.

Another very solid argument in my opinion is that of Bitcoin ultimately matin or surpassing Gold market cap currently at around 10 trillion US $.

When that flip happens, the price on one Bitcoin will be roughly $530,000.

The theory behind Bitcoin eventually overtaking gold is that it is its modern Digital version.

Gold has long been the ultimate store of value, however it is now antiquated. It is bulky, it needs to be stored, it is not easily exchangeable and ultimately, while scarcer than other commodities, it is still produced and its supply can technically be still very large.Bitcoin is superior in all aspects.

And since sovereign nations are debasing their fiat currencies, bonds are the ultimate bubble with artificially negative yields and stocks are only a good store of value long term as long as companies are either able to raise their prices or their margins faster than the rate of monetary expansion, Bitcoin might very well become the ultimate choice for storing value.

From bitcoin.org - Why do bitcoins have value?

Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.