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Bitcoin Vlauation


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An Attempt to Get a Grip on the Fundamentals of Bitcoin Valuation

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Bitcoin Vlauation

  1. 1. Bitcoin Valuation An Attempt to Get a Grip on the Fundamentals Frankfurt, Jan 9, 2014
  2. 2. What is Value? Some Terms: Value, Price, Cost, Fair Value, Inherent Value
  3. 3. Why Buy? Speculation Attempt to profit from fluctuation, not underlying financial attributes. Trading wikipedia: day trading is speculation. Investing Long-term, based on financial attributes. Value Investing Very long-term, based on value.
  4. 4. Value vs. Price Price: Current market price, driven by supply and demand Value: Expected proceeds from sale (whole / sum of parts), cost of making or buying, expected returns (e. g. dividends) Expected returns: DCF is the generally accepted method
  5. 5. Discounted Cash Flow
  6. 6. The value of Bitcoin is only based on the expectation that it might become a generally accepted means of payment some day. might —> Discount rate generally —> Money supply being replaced some day —> time factor in DCF
  7. 7. When will Bitcoin be ubiquitous? 1. Other innovations: books, electricity, telephone, Internet, mobile phones, … 2. Often longer than expected (UMTS, ASP, …) 3. With DCF, time is a huge factor. 4. When will it happen for Bitcoin?
  8. 8. Worldwide Money Supply $ 50 trillion (World bank, IMF, etc.) Ubiquity (20 years) means: 100 % replacement. DCF: One “return” of $ 50 trillion in 2023 to be discounted for present value
  9. 9. Discount Rate 1. Covers risk 2. Safe (long-term): 6 % 3. VC, high risk bonds: approx. 25 % 4. Market acceptance is the main risk for new ventures (Oliver Samwer)
  10. 10. The Big Picture Bitcoin bears no dividends Market price and “production” cost alone no measure for value Money supply might be replaced Reasonable assumptions for parameters: time, future value, risk.
  11. 11. Present Value: $ 28,823.00 What a contrast to the current market price!
  12. 12. Influencing Factors:
  13. 13. Check that site for more details and discussions.