How to put a valuation on BitCoin, version IV:

johnpitts 1 year ago bitcoinvaluationmoneyinvestingbtc

As a financial analyst, I've learned there's more than just one way to determine valuation targets for an asset. In the cellars and brigs of investment banks, they'll teach plebes and midshipmen there's only one way: Discounted Future Cash Flows. This is a procedure much like some of the math or computer science problems you may have been given in junior high, or college. But valuation is never straight math, it's so much more. The more effort and work you put into understanding how the world works, the closer you can get to understanding the possibilities for prices, given the many different variables which have nothing to do with math. Think of nuclear war. What is Google's stock worth if Russia and the United States decide to take each other out with nuclear missiles? That's a hard one, right, but an easy estimate might be: A LOT lower than currently.

Using nuclear war as a potential scenario is just an exercise to show just how UN-mathematical valuations can be. Many on Wall Street would like to convince you they can pull out their HP calculators (which use Reverse Polish Notation just like bitcoin scripting language, or Forth) and whip up a valuation, sign it with Goldman Sachs or Lehman Brothers, and "der you go, one perfectly mathematical valuation coming right up!". Reality is so much different in the financial world. Math is great for financial accounting, and laughable when doing valuations. This is not to say valuing assets doesn't use a math as perhaps its most important tool, it does. It's just that there's some REALLY important things to consider before a financial analyst worships at the temple of business math. So here, we would like to show you a simple but interesting way to think about what BitCoin valuation could be inside the next 3 years under a certain plausible scenario.

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Professional investors pay a LOT of money, lots of zeroes, for analyses which are worse than what I'll present below. This isn't to say you should pay the pittance I'm charging for a single insight. The valuation method is worthwhile under the plausible conditions listed here:

  1. You believe immutable-ledger money is a zero-sum game; aka, there's just one winner, and that winner will be BitCoin Satoshi Vision (or BSV as the NICE exchanges named it).
  2. You believe the "What is Money?" & "What is BitCoin?" articles premises (plural) are correct, that BitCoin SV has value ONLY if it offers a superior computation network, and therefore has its tokens backed by valuable information (money) and transaction services (the mint).
  3. Because of 2), you understand btc has no value whatsoever in the future. We will provide an answer for WHEN that future likely is, and why (below the paywall), but if you don't believe btc has no value, then you should probably just skip the rest of this article, and if you come back its better to just reread "What is Money?" and formulate a reason why it's wrong.

However, the value you take from this math+experience single-version analysis will give you 2 things:

  1. A valuation for BitCoin in the future, via a different method than presented in "What is BitCoin?", and a far simpler one.
  2. A perspective that there's more than one way to skin a cat when it comes to valuation.

author's note:, tried a 2nd time to put a picture into avatar hole, but no worky. Put URL in, but "save" button wouldn't animate. Bug or am I missing something?

Finally, I think even if you feel disappointed in the simplicity of this valuation, I'm willing to bet it sticks in your brain more than the methodology from "What is BitCoin?", or I'll simply give you your money back if you think it's crap. Why? Because it's simpler, and the math is much easier.