Editing Bitcoin
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Bitcoin is a currency. What makes the currency unique is that it's the most popular cryptocurrency. Research suggests that the most popular cryptocurrency will maintain its purchasing power for much longer than any other currency. In other words, the cryptocurrency will be a much better currency. | Bitcoin is a currency. What makes the currency unique is that it's the most popular cryptocurrency. Research suggests that the most popular cryptocurrency will maintain its purchasing power for much longer than any other currency. In other words, the cryptocurrency will be a much better currency. | ||
The degree of risk associated with an investment in Bitcoin is 'medium', with the | The degree of risk associated with an investment in Bitcoin is 'medium', with the shares having an adjusted beta that is 42% above the market (1.42 vs. 1). | ||
Assuming Bitcoin's share of the money supply increases to 10% (from 2.2%) and | Assuming Bitcoin's share of the money supply increases to 10% (from 2.2%) and the value of the global money supply remains unchanged (at $35.2 trillion), then that equates to a Bitcoin price of $167,619 per coin (from $41,458), and upside of 4x. | ||
== Operations == | == Operations == | ||
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# '''Economic and Political Context:''' The development of Bitcoin was also influenced by the economic environment, particularly the financial crisis of 2007-2008. This period led to increased skepticism about traditional banking systems and interest in alternative forms of currency that weren't controlled by governments or central banks. | # '''Economic and Political Context:''' The development of Bitcoin was also influenced by the economic environment, particularly the financial crisis of 2007-2008. This period led to increased skepticism about traditional banking systems and interest in alternative forms of currency that weren't controlled by governments or central banks. | ||
# '''Influence of Previous Concepts:''' Bitcoin combined concepts from previously proposed systems like b-money and Bit Gold, which outlined ideas for decentralised digital currencies, but never fully developed them into working systems. | # '''Influence of Previous Concepts:''' Bitcoin combined concepts from previously proposed systems like b-money and Bit Gold, which outlined ideas for decentralised digital currencies, but never fully developed them into working systems. | ||
In summary, Bitcoin emerged from a confluence of ideas from the Cypherpunk movement, previous digital cash experiments, cryptographic advancements, and the socio-economic context of the time. It was the first successful implementation of a decentralised digital currency, solving key issues like the double-spending problem through its novel use of blockchain technology. | |||
=== What's the mission of Bitcoin? === | === What's the mission of Bitcoin? === | ||
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The main benefit of operating on a decentralised network (rather than a centralised network) is that within the network, there is no single point of failure. In a centralised network, if the central entity that operates the network fails, then the whole network - and the currency that operates on the network - fails (i.e. there is a single point of failure in the network), whereas in a decentralised network, becasue there is no central entity, there is no single point of failure, and therefore the network - and currency - is likely to last for much longer, possibly forever. | The main benefit of operating on a decentralised network (rather than a centralised network) is that within the network, there is no single point of failure. In a centralised network, if the central entity that operates the network fails, then the whole network - and the currency that operates on the network - fails (i.e. there is a single point of failure in the network), whereas in a decentralised network, becasue there is no central entity, there is no single point of failure, and therefore the network - and currency - is likely to last for much longer, possibly forever. | ||
For example, the world's first ever known currency was operated by a central entity (The Kingdom of Lydia). When the central entity failed, so did the currency. | For example, the world's first ever known currency is the Mesopotamian shekel, and it was operated by a central entity (The Kingdom of Lydia). When the central entity failed, so did the currency. | ||
[[File:Value of U.S. Dollar - Log.jpg]] | [[File:Value of U.S. Dollar - Log.jpg]] | ||
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=== Total Addressable Market (TAM) === | === Total Addressable Market (TAM) === | ||
The TAM for Bitcoin is the global currency market. This includes all forms of money circulation worldwide — from fiat currencies held in banks and cash reserves to investments and digital transactions. This encompasses every potential user or entity that could theoretically adopt Bitcoin, either as a means of transaction, a store of value, or for investment purposes. It represents the maximum possible market opportunity for Bitcoin, assuming universal adoption and acceptance. | The TAM for Bitcoin is indeed the global currency market. This includes all forms of money circulation worldwide — from fiat currencies held in banks and cash reserves to investments and digital transactions. This encompasses every potential user or entity that could theoretically adopt Bitcoin, either as a means of transaction, a store of value, or for investment purposes. It represents the maximum possible market opportunity for Bitcoin, assuming universal adoption and acceptance. | ||
The global currency market, including fiat money and investments, is vast. As of 2023, the total value of all the money in the world, including broad money (M3), which covers cash, bank deposits, and money market securities, was estimated to be in the range of approximately $100 trillion USD. Bitcoin's TAM, when considering the potential to replace or complement global currency usage, would thus be a fraction of this amount. | The global currency market, including fiat money and investments, is vast. As of 2023, the total value of all the money in the world, including broad money (M3), which covers cash, bank deposits, and money market securities, was estimated to be in the range of approximately $100 trillion USD. Bitcoin's TAM, when considering the potential to replace or complement global currency usage, would thus be a fraction of this amount. | ||
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Estimating the U.S. cryptocurrency market is more complex, as it would involve considering the proportion of the U.S. population or financial sector engaged in cryptocurrency usage. As a rough estimate, if we consider the U.S. as accounting for about 20-30% of the global cryptocurrency market (a broad assumption based on its economic size and level of investment in cryptocurrencies), the SOM for Bitcoin in the U.S. could be a proportion of the global market cap, roughly in the range of $200 billion to $600 billion USD. | Estimating the U.S. cryptocurrency market is more complex, as it would involve considering the proportion of the U.S. population or financial sector engaged in cryptocurrency usage. As a rough estimate, if we consider the U.S. as accounting for about 20-30% of the global cryptocurrency market (a broad assumption based on its economic size and level of investment in cryptocurrencies), the SOM for Bitcoin in the U.S. could be a proportion of the global market cap, roughly in the range of $200 billion to $600 billion USD. | ||
== Risks == | == Risks == | ||
As with any investment, investing in Bitcoin carries a level of risk. Overall, based on the Bitcoin's adjusted beta (i.e. 1.42), the degree of risk associated with an investment in | As with any investment, investing in Bitcoin carries a level of risk. Overall, based on the Bitcoin's adjusted beta (i.e. 1.42), the degree of risk associated with an investment in Tesla is 'medium'. | ||
Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report. | Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report. | ||
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=== What's the expected return of an investment in Bitcoin? === | === 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 | The Stockhub users estimate that the expected return of an investment in Bitcoin over the next five years is 4x, which equates to an annual return of 32%. In other words, an £100,000 investment in the company is expected to return £300,000 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 | Assuming that a suitable return level over five years is 32% per year or less, and Bitcoin achieves its expected return level (of 32%), then an investment in Bitcoin is considered to be an 'suitable' one. | ||
=== What are the assumptions used to estimate the return? === | === What are the assumptions used to estimate the return? === | ||
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|- | |- | ||
|What is the estimated investment lifespan? | |What is the estimated investment lifespan? | ||
| | |1,000 years | ||
| | | | ||
|- | |- | ||
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|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%. | |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 | |Which distribution function do you want to use to estimate company revenue? | ||
|Gaussian | |Gaussian | ||
|Research suggests that the | |Research suggests that the revenue pattern of companies 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 | |What's the estimated standard deviation of company revenue? | ||
| | |100 years | ||
|Another way of asking this question is this way: within how many years either side of the mean does 68% of | |Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Bitcoin's current estimated revenue amount (i.e. $ccc million) and Bitcoin's estimated lifespan (i.e. 1,000 years) and Bitcoin's estimated current stage of its lifecycle (i.e. introduction stage), the Stockhub users suggest using 100 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? | |What's the current value of the investment? | ||
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|- | |- | ||
|The lifespan of Bitcoin | |The lifespan of Bitcoin | ||
| | |ccc% | ||
| | |ccc% | ||
| | |ccc% | ||
|- | |- | ||
|The size of the total addressable market | |The size of the total addressable market | ||
| | |ccc% | ||
| | |ccc% | ||
| | |ccc% | ||
|- | |- | ||
|Bitcoin peak market share | |Bitcoin peak market share | ||
| | |ccc% | ||
| | | ccc% | ||
| | |ccc% | ||
|} | |} | ||
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== Appendix == | == Appendix == | ||
=== Cryptocurrencies comparisons === | === Cryptocurrencies comparisons === | ||
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{| class="wikitable" | {| class="wikitable" | ||
|+ | |+ | ||
! | !urrency/Asset | ||
!First Cryptocurrency | !First Cryptocurrency | ||
!Smart Contract Capabilities | !Smart Contract Capabilities | ||