Editing Bitcoin (section)

==Valuation==

=== What's the expected return of an investment in Bitcoin? ===
The Stockhub users estimate that the expected return of an investment in Bitcoin over the next five years is 5x, which equates to an annual return of 39%. In other words, an £100,000 investment in the asset is expected to return £500,000 in five years time. The assumptions used to estimate the return figure can be found in the table below.

Assuming that a suitable return level over five years is 39% per year or less, and Bitcoin achieves its expected return level (of 39%), then an investment in Bitcoin is considered to be an 'suitable' one.

=== What are the assumptions used to estimate the return? ===
{| class="wikitable"
|+Key inputs
!Description
!Value
!Commentary
|-
|What's the estimated current size of the total addressable market?
|$40,000,000,000,000
|The total value of narrow money globally is estimated at $40 trillion as at 13th November 2023, according to The Money Project.
|-
|What is the estimated investment lifespan?
|250 years
|
|-
|What's the estimated annual growth rate of the total addressable market over the lifecycle of the investment?
|0.83%
|We have assumed that the growth rate of the TAM is the same as global population growth, which is 0.83% in 2022.
|-
|What's the estimated investment peak market share?
|10%
|The Stockhub users estimate that especially given the key benefit of the asset, the peak market share of Bitcoin is around 10.00%, and, therefore, suggests using the share amount here. As of 14th November 2023, Bitcoin's current share of the market is estimated at around 1.77%.
|-
|Which distribution function do you want to use to estimate investment value?
|Gaussian
|Research suggests that the value pattern of investments is similar to the pattern produced by the Gaussian distribution function (i.e. the revenue distribution is bell shaped), so the Stockhub users suggest using that function here.
|-
|What's the estimated standard deviation of asset value?
|50 years
|Another way of asking this question is this way: within how many years either side of the mean does 68% of value occur? Based on Bitcoin's current price (i.e. $37,257.50) and Bitcoin's estimated lifespan (i.e. 250 years), the Stockhub users suggest using 50 years (i.e. 68% of all sales happen within 100 years either side of the mean year), so that's what's used here.
|-
|What's the current value of the investment?
|$709,551,271,083
|According to Yahoo Finance, the current value of Bitcoin as of 15th November 2023 is $709,551,271,083.<ref name=":0">https://finance.yahoo.com/cryptocurrencies/</ref> Bitcoin currently trades at $36,310<ref name=":0" /> and the maximum number of coins is 21 million.
|-
|Which time period do you want to use to estimate the expected return?
|Between now and five years time
|Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years. Accordingly, Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the investment between now and five years time.
|-
|Which valuation recommendation method do you want to use?
|Relative
|There's two main types of valuation recommendation methods, relative and absolute. The relative method determines the investment recommendation relative to other investments (e.g. the investment is "suitable" if it's within say the top 10% of the investment universe in terms of investment returns), whereas the absolute method determines the recommendation based on a fixed return amount (e.g. the investment is "suitable" if it returns 50% or more). Assuming sufficient data, the Stockhub users suggest using the relative method.
|-
|Which top proportion of the investment universe constitutes a "suitable" rating?
|10%
|The proportion depends on the user's preference. That said, typically, the higher the proportion, the higher the risk associated with the investment.
|-
|Which universe of investments do you want to use?
|All investments
|If the main objective of the user is to maximise investment returns, then the Stockhub users suggest using 'all investments' as the investment universe.
|}

===Sensitivity analysis===

The main inputs that result in the greatest change in the expected return of the Bitcoin investment are, in order of importance (from highest to lowest):   

#The size of the total addressable market (the default size is $40 trillion);
#Bitcoin peak market share (the default share is 10%); and
#The estimated Bitcoin lifespan (the default lifespan is 1,000 years).

The impact of a 50% change in those main inputs to the expected return of the Bitcoin investment is shown in the table below.

{| class="wikitable sortable"
|+Bitcoin investment expected return sensitivity analysis
!Main input
!50% worse 
!Unchanged
!50% better
|-
|The lifespan of Bitcoin
|3x
|5x
|8x
|-
|The size of the total addressable market
|3x
|5x
|8x
|-
|Bitcoin peak market share
|3x
| 5x
|8x
|}