- is a superior store of value due to its portability
- The offshore banking market can be viewed as a proxy for store of value
- Given such valuation metrics, can Bitcoin still appreciate significantly
What is the fundamental value of Bitcoin? It is difficult to give the answer using traditional valuation metrics as Bitcoin does not generate any income streams and therefore cannot be valued based on discounted cash flow. However, in a recent Market Hive podcast with Bilal Hafeez, Ari Paul co-founder of the crypto firm BlockTower, offers an interesting approach to looking at Bitcoin on a fundamental basis.
Paul argues that there is an objective way of realizing economic value Cryptocurrency to be valued if we consider Bitcoin essentially as a “Swiss bank” in our pocket.
Assuming you accept Bitcoin as a store of value – and given its near universal acceptance around the world – it is reasonable to say that it has achieved this status. In this case, Bitcoin becomes a far superior form of. Just like gold, Bitcoin is license-free and allows the owner of the asset to convert it into any good or service anywhere in the world. While this is nothing more than a social convention, it is also gold, as it has no intrinsic value and does not generate any cash flow. The main advantage of Bitcoin over gold is its portability.
In contrast to the owner of gold, the owner of Bitcoin Storing billions of dollars in assets is nothing more than a flash drive or a phone app. Bitcoin’s portability advantage is so immense that it can ultimately completely replace gold as a store of value. Although bitcoin, like fiat, is more of a digital asset than a physical asset, unlike fiat, the supply of bitcoin is limited. In fact, conceptually, Bitcoin is actually a superior store of value over gold, as its offering can never be expanded.
Even if we accept that Bitcoin is a store of value – a modern version of digital gold – the question of valuation remains open. However, Paul suggests a novel method to determine the possible fundamental value of Bitcoin. If we accept the offshore banking market as a proxy for the value of all assets that investors want to protect from arbitrary state seizure, that market is currently valued at around $ 35 trillion.
Most of these assets are not just fiat cash and gold, but productive assets like stocks and bonds, so a simple one-to-one comparison would be incorrect. However, if we accept the general rating metric, Bitcoin that currently has one Market capitalization of less than a trillion dollars has many fundamental advantages. If we simply assign Bitcoin a value of 10% of the offshore banking market, then the cryptocurrency has the potential to triple in the foreseeable future.
Source: Crypto News Deutsch