When you see something titled “Bitcoin 2018 Predictions”, you are probably most interested in just one thing: “Where will it go?” So let’s start there, but then add some other observations on a variety of topics.
#1: We expect bitcoin will trade for between $6,470 and $21,600.
Here’s how we get there:
Bitcoin’s primary “real” use case right now is personal asset protection. Yes, that includes money laundering and tax evasion. But it also incorporates the legitimate desire of honest people living in countries with less-than-exemplary rules of law to shield some of their assets.
Moment - Instrument - Purposes - Bill - Central
At the moment, the primary instrument used globally for these purposes is the $100 bill. Yes, the European Central Bank also issues high denomination notes. But the gold standard of paper currency is the American C-Note. (Oxymoron intended).
While bitcoin doesn’t have the backing of the US government, you can’t forge a bitcoin (and there are likely as many fake $100s in circulation as real ones). Plus, you don’t need a locked aluminum case and a handcuff to transport it. So we’ll call it a draw.
Bills - Circulation - Federal - Reserve - Estimate
There are $1.1 trillion of legitimate $100 bills in circulation, and by the Federal Reserve’s estimate some 80% live offshore.
If bitcoin were worth 10% of the $100s in circulation, its value would be $6,470. The math: $110 billion divided by 17 million bitcoins equals $6,470.
% - Circulation - Value - Math - Point
If bitcoin were worth 33% of all the $100s in circulation, it value would be $21,600. Same math as prior point. Could bitcoin get to 50% of the value of all $100s? Possibly, but that level of adoption likely requires more time.
At the average of the high and low, we get to $14,035. That’s not far off the current trading price, which gives us comfort we’re on the right track with our valuation. The only way it goes substantially higher is...
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