This question has not only driven the Bitcoin community since the run on cryptocurrencies in general and Bitcoin in particular. Researchers have now discovered in a study, the surprising “really fair value” of Bitcoin.
Hardly any other investment is as volatile as the largest digital currency Bitcoin. The Bitcoin price has seen $ 1,000 to $ 20,000 in 12 months. Currently, the price seems to settle at around $ 9,000. The market does not seem to have found a satisfactory answer to the question of how much a Bitcoin really is worth — as evidenced by the persistently strong price fluctuations. But two economists now want to have determined the fair value of Bitcoin — by applying a 1911 theory to the cryptocurrency market. How much the world’s most popular cryptocurrency is actually worth, will not only surprise die-hard crypto fans.
Bitcoin massively overvalued?
The two economists Savvas Savouri, partner in a London hedge fund, and Richard Jackman, emeritus professor at the London School of Economics, have called the theory “Côtes du Rhône Theory”. In essence, it is based on knowing the value of a currency by knowing its total availability — the amount of money — the velocity of circulation and the amount of goods and services it is spent on, reports Bloomberg. The theory of the two researchers is based on the quantitative equation of the US scientist Irving Fisher.
Based on this theory, Savouri and Jackman come to a surprising realization about the true value of Bitcoin. The current available amount of Bitcoin tokens is around 17 million. Based on the assumption that the digital coins are used on average four times a year, so would have to be made in the year around 64 million Bitcoin payments. The sum of Bitcoin-paid goods and services is estimated at $ 1.2 billion by Savouri and Jackman. Dividing this sum by the supposed 64 million Bitcoin payments a year, you get a surprisingly low price of $ 18,75.
Theory with weaknesses
But as simple as the theory may be, it is so vulnerable because it is based largely on estimates. After all, except for the money in circulation, none of the other factors are confirmed.
An analyst Dan Davies of Frontline, just a few months ago, had calculated a Bitcoin value of $ 600 using the same theory. As reported by “Bloomberg”, he had provided estimates for the variables that resulted in a different result.
The experts from Allianz Global Investors also recently tried to get to the bottom of Bitcoin’s intrinsic value. Their result: The cryptocurrency has an intrinsic value of zero. The experts justified their pessimistic assessment with the fact that the Bitcoin — in contrast to government bonds, stocks or paper money — no claim against a third party exists. In addition, bring the Internet money the owner no income.
Meanwhile, experts continue to beat with price targets for the world’s largest cryptocurrency. The avowed Bitcoin bull Tim Draper expects to increase the bitcoin value by a factor of thirty within the next four years. His forecast: The Bitcoin will rise to US $ 250,000. Other experts are issuing Bitcoin price targets between $ 100 and $ 91,000.
It becomes clear: Even for market experts, the price development in a still relatively young phenomenon such as crypto currencies is not foreseeable. There are hardly any reliable forecasts and analysts on further performance. Where the Bitcoin journey is likely to be depends in particular on how the Blockchain technology underlying digital currency applications will be used in the future. Because in one, many experts agree: This technology is future-proof.
Author: Marko Vidrih @cryptomarks