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December 17, 2017, 07:30:31 PM |
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Trying to put together a fundamentally strong valuation methodology for bitcoin. Will update post basis inputs supported with theoretically strong arguments or value adding references/examples.
Throwing some rough ideas below, not yet in final form. Probably a little all over the place, yet to get thoughts in shape on how all of this impacts valuattion.
Assumption:
1. Bitcoin is an asset
2. Some % nos. used below are guesses. Will edit if better guesstimates are provided.
Potentially important aspects for valuation:
1. Substitute for shadow economy global remittances (hawala) to bypass capital controls
So if the global hawala volume is x, BTC could be useful for 5% of x as of now.
The contribution should increase with time as BTC becomes more mainstream.
What about proportion of other coins? BTC's challenges with txn time and scalability
2. Substitute for legal global remittances
Proportion of forex txns facilited by BTC would be a guesstimate for valuation
3. BTC as substitute for gold
If global gold market is x, BTC could currently be substituting 2% of the market. As trust improves, this could increase.
4. Substitute for currency
How is USD or any other currency fundamentally valued, apart from short term demand and supply ? Depends on GDP and currency under circulation?
5. What is value of consensus?
Gold derives the value it does because everyone agrees that it is something of value. How to quantify that value and at what level is BTC?
6. Value driven by accessibility / liquidity
The more exchanges, the more people can invest into bitcoin
The more saturation in other asset classes, the more people would like to diversify
Other aspects to add: Speculation, financial inclusion of the underbanked, DCF valuation?, risks and more
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