We model this assessment on David Woo’s December 2013 report: “Bitcoin: a first assessment” (Bank of America / Merrill Lynch). Mr. Woo begins with an extensive and apt summary of the bitcoin ecosystem, and we highly recommend reading his report. He goes on to analyze bitcoin’s fair value using an equity-equivalence framework. We re-run Mr. Woo’s value analysis (and then some) below, using what we consider more appropriate methodology and comparative metrics for a currency/commodity hybrid such as bitcoin.
When we add our estimated market capitalization of bitcoin if it captures 10% of common medium-of-exchange uses to our estimate if it captures up to 10% of store-of-value uses, we arrive at a total market-cap of ~$574.6B…
The key takeaway is that
“[bitcoin] may very likely be the best form of money that we’ve ever seen in the history of civilization.”
Indeed, Casares isn’t the only thought-leader reiterating the core of bitcoin’s promise amidst the current hype of alt coins and app coins. Fred Wilson recently commented:
Bitcoin gives the world completely new financial possibilities through the combination of the Blockchain (bitcoin’s public ledger) and cryptography. Proof-of-solvency is just the obvious first-step in giving financial companies the ability to provide customers with unprecedented transparency and control of funds.
Much of human interaction is moving to digital realms due to the friction-reduction and efficiency that it offers. The same is now happening with money, courtesy of bitcoin.