I think the best two ways to value bitcoin is to:
Value it to Gold
Value it using Metcalfe's Law
Valuing it using gold as model, one needs to look at its utility divided by its scarcity. Its scarcity is known at 21 million units. For its utility, we can input the total USD value of the world gold market. That value is approximately 7.5 to 8 trillion USD according to several sources. http://onlygold.com/Info/All-The-Gold-In-The-World.asp, http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/
To be conservative lets use 7.5 trillion. So if 10% of this market, or $750 billion, were to transfer to Bitcoin, then 750 billion USD/ 21 million Bitcoin would equate to price of $35,714 per BTC.
- Using Metcalfe's Law, Bitcoin total value would equal the square of the number of users divided by the number of units. The best estimate of number of users is around 14.7 million according to this website:
https://www.statista.com/statistics/647374/worldwide-blockchain-wallet-users/
For price value unit in USD, lets use the lowest possible unit of measure for the USD, which is 1 penny.
So doing the math, 14.7 million ^2 / 21,000,000 /(100 cents/USD) = $102,900 per BTC
Taking an average of these two figures puts us at $69,307.
Both of the methodologies used take into account some very conservative assumptions. In method one, we are only taking into account a 10% displacement in the gold market, where Bitcoin could end up taking much more. In method two, we are assuming the number of users stays flat at 14.7 million and does not grow any further.
The main aggressive assumption is the limitation to 21 million units of BTC. While this is technically true, it does not take into account attrition due to the many forks of bitcoin that have and will occur, as well as the entire altcoin market that will also suck value away. Currently, bitcoin has approximately 1/3 of the total market capitalization of cryptocurrencies in their totality, so taking this into account we arrive at $69,307/ 3 = $23,102 per BTC.
The final answer of this analysis is $23,102 per BTC, however I do contend that this value could be much higher if:
a) Users supplant gold for BTC in larger numbers
b) more users of BTC present themselves in the future
c) Users prefer BTC in greater proportion to competing cryptocurrencies than they do today.
Based on today's price of around $11,500 USD, one could argue that BTC has 100+ upside based on today's fundamentals.
Cheers
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