Exploring Bitcoin Valuation Methodologies
For traditional asset classes, there are widely accepted ways for estimating future values. To value a stock, open up a handy discounted cash flow model1 and plunk in your assumptions. For bonds, do a little math2 and a bit of credit analysis. Want to know what a house is worth? Look up the comps.
Of course, nothing is inevitable, and each technique can have personal touches that result in widely different results. Indeed, valuation is more art than science. But at least there are guideposts and general rules of thumb.
When it comes to bitcoin, there’s no consensus on how it should be valued, but that doesn’t mean people aren’t trying.
So far, attempts to predict where bitcoin is going have pulled on techniques used in various asset classes. That isn’t surprising. People who have come to bitcoin from the world of finance see bits and pieces of their former lives in the new asset class. Former stock analysts see the network effects so prominent in the biggest tech companies. Some bond traders price it as if it were insurance against sovereign currency defaults. Investors in precious metals think stock-to-flow models are the way to go.
In this article, we take a look at some of the ways for estimating bitcoin’s future price. Ultimately, only time will tell which approach will prove best. With hindsight, perhaps none will provide an accurate forecast. But by considering the different methods, we might establish a framework for mapping what is undoubtedly a new frontier.
Learn more from FS | NYDIG
View important footnotes + disclosures
This report has been prepared solely for informational purposes and does not represent investment advice or provide an opinion regarding the fairness of any transaction to any and all parties nor does it constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy. Charts and graphs provided herein are for illustrative purposes only. This report does not represent valuation judgments with respect to any financial instrument, issuer, security or sector that may be described or referenced herein and does not represent a formal or official view of New York Digital Investment Group or its affiliates (“NYDIG”). It should not be assumed that NYDIG will make investment recommendations in the future that are consistent with the views expressed herein, or use any or all of the techniques or methods of analysis described herein in managing client accounts. NYDIG may have positions (long or short) or engage in securities transactions that are not consistent with the information and views expressed in this report. There can be no assurance that any investment strategy or technique will be successful. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment, which may differ materially, and should not be relied upon as such. Target or recommended allocations contained herein are subject to change. There is no assurance that such allocations will produce the desired results. The investment strategies, techniques or philosophies discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. The information provided herein is valid only for the purpose stated herein and as of the date hereof (or such other date as may be indicated herein) and no undertaking has been made to update the information, which may be superseded by subsequent market events or for other reasons. The information in this report may contain forward-looking statements regarding future events, targets, or expectations regarding the strategies, techniques or investment philosophies described herein. NYDIG neither assumes any duty to nor undertakes to update any forward-looking statements. There is no assurance that any forward-looking events or targets will be achieved, and actual outcomes may be significantly different from those shown herein. The information in this report, including statements concerning financial market trends, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Information furnished by others, upon which all or portions of this report are based, are from sources believed to be reliable. However, NYDIG makes no representation as to the accuracy, adequacy or completeness of such information and has accepted the information without further verification. No warranty is given as to the accuracy, adequacy or completeness of such information. No responsibility is taken for changes in market conditions or laws or regulations and no obligation is assumed to revise this report to reflect changes, events or conditions that occur subsequent to the date hereof. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be relied on in making an investment or other decision. Legal advice can only be provided by legal counsel. Before deciding to proceed with any investment, investors should review all relevant investment considerations and consult with their own advisors. Any decision to invest should be made solely in reliance upon the definitive offering documents for the investment. NYDIG shall have no liability to any third party in respect of this report or any actions taken or decisions made as a consequence of the information set forth herein. By accepting this report in its entirety, the recipient acknowledges its understanding and acceptance of the foregoing terms.