The Bitcoin Formula - 1 Bitcoin = US$428,000, Mainsteemmedia Release

Disclaimer: I wrote this article when I first started to learn about the crypto-economy. I am terrible with computers but am improving as my venture into the exciting world of crypto's led me to the mainsteem social media revolution. I no longer hold the view that the eventual market share of bitcoin will be as is stated in this article. I do however believe that Ethereum has the potential to see this eventual market dominance. I have not traded traditional fiats or commodities since writing this article. Why would I?

The Beach Bum Investor
Bitcoin Market Analysis – 1 Bitcoin = US$428,000
20/05/2017

As a rookie with only 3 months training and 1 week of day trading investment experience, I am potentially about to destroy my career before it has even begun. I have been taught by my mentor rather than promising returns on high-risk investments when day trading (a common tactic to lure new money in to what can be an unethical and corrupt industry at the best of times), offer your investors an idea. Back it up with as much factual evidence and research as you can to support your idea, and ask them to also investigate the idea for themselves before deciding to buy. Seemed logical to me. I ask anyone reading this to remember that all I am offering you is an idea based on the research I have done. And this is my first go at it, so take it easy on me.

I was out surfing one day when a friend who knew about my training said, “Hey Fish (how most know me), you’re into this investment shit, what do you reckon about bitcoin?”. Already consumed with my training and looking at long term strategies for Oil and Gold based around simple maths assuming cost price of production, I was originally dismissive of this idea and replied, “Mate, with that sort of growth you might have missed the boat on that one.”

Later that day, after 3 hours of crystal blue waters and left hand drainers (surfer talk for good waves) had somewhat taken its toll physically, I realised that this was an opportunity to have a go at putting my training into action. I began research on Bitcoin. I had no idea how little I knew about this emerging concept of a digital asset and realised it’s potential immediately. But I still couldn’t figure out how I should value this relatively new investment?

I had to think logically, “how can I use the same simple maths to try to determine growth rates of this investment, when the world hasn’t agreed on what we are dealing with here?” I went back to my training from my mentor Jimmy, one of the few ethical people I’ve met in this industry, who always makes sure his clients (who are willing to listen) are educated on the investment and understand the risks before selling the dream of quick money. He was explaining to me that the rise and fall of Gold during the GFC was very much media driven, and at $2,000 per ounce gold was being sold at double its production cost which was not sustainable (at least until production costs increased to justify the selling price).

The economy was being added to each year with ongoing mining and gold production effectively reducing overall demand on the existing market by continuously increasing supply. I thought this was as good a place as any to start, assumption number 1. The world has now accepted Bitcoin as a commodity.

This theory gained momentum when I lined up the charts and noticed Bitcoin appeared to be having trouble getting passed the price per ounce of Gold (a well known safe haven for long term investment strategies). But media fuelled buzz began to accelerate Bitcoin’s growth once it broke through the psychological resistance value of Gold. So now I could assume that not only had the wold accepted Bitcoin as a commodity, but we had overwhelmingly agreed that this commodity was worth more per coin than an ounce of Gold. Assumption number 2, this commodity would hold the same relative value per available coin to Gold per available ounce as it does today into the future.

Spending as much time as I can at the beach and being terrible with the digital world, this thought baffled me as I could not accept that something that didn’t physically exist was worth more than my wetsuit, let alone Gold. “Surely this is a bubble waiting to burst” I thought as I scratched my head trying to understand how so many people were buying what was essentially thin air. “Now I must continue my research to warn Joshy (my mate from the surf) if nothing else.”

So, I went back to the facts and started really looking in to how bitcoin works, reading about blockchains and advanced computing algorithms that were being used to digitally “mine” these coins, I felt out of my depth. I’m just a simple surfer who enjoys a bit of economics and politics on the side. Who was I to be giving advice on this sort of investment? Truth be known I hate computers, but then I found 1 fact that changed everything. The overall economy of bitcoin is predetermined, 21 million coins.

Contrary to what some of my friends may think after tipping them into Bitcoin I’m not a maths genius, but I’ve watched enough of “The Big Bang Theory” to know that a constant in any theoretical formula is a good thing! I used the estimated inflation rates of the gold economy based on the existing economy, and annual production rates. And then scaled that with known inbuilt future inflation of Bitcoin. The number of coins in existence, and yet to be mined, which is more accurate as it is fact rather than an estimate.

Each year I extended the formula, the numbers astounded me more and more, had I got the formula right? Could 1 bitcoin really be worth that much eventually? Surely not, the highest prediction I’d seen from a professional analyst was $10,000 per coin. But I thought about it, the truth is no one knows for sure how much of the world’s Gold or Oil is actually left to be mined. And so long as we are prepared to keep destroying our world in the process, we keep finding more and more of these physical commodities (sorry, you’ll get the odd bit of “save the world” propaganda from me) making their future rarity harder to predict than Bitcoin.

So, I had a theoretical mathematical formula to predict the future worth of this new commodity with only 2 key assumptions. “That’s Bitcoin!” I thought further embracing the value of the asset I was just learning about (in Australia we often say, “That’s Gold!” as a colloquialism for something good).

I had taken someone else’s idea and compiled enough evidence and even the maths to back up the idea. I felt confident in giving my advice. My mate gave me $150 and I chipped in $150 to try for real in my day trading account which had been setup for my training. Fortunately, I had also been doing more training on the technical side of day trading when I shared Joshy’s idea, and my research with Jimmy, and convinced him to buy 4 coins in his own day trading account earlier that day. When markets opened Monday morning I had made my first client 100% on his money over the weekend, and my mentor about
$1200 (not a bad thanks for the training, hey Jimmy?) And not a bad start to my career.

Growing more confident in my newly learned skills I began investing for my best friend of 20 years who backed me with a larger capital of $500 (which I also matched) knowing full well the risk associated with day trading and that he could lose it all, but happy to give his best mate a go.

I was working on a more solid long term strategy with a diverse range of investments which did include a small amount in bitcoin as the high risk high reward, mainly for fun investment. The overall short term strategy was heavily centred around anticipated strength in the GBP (Great Britain Pound).I had taken a starting capital of $1300 (after matching both mates investments), had a great first day on Oil and Bitcoin and had diversified into Britain with $4,000 capital by the end of the day one. Far better than any returns I’d shown in a single day of training.

I woke to the terrible news in Britain the same as all of us did. Obviously my first thoughts were for the family and friends of the victims of this terrible event (we are all thinking about you still) but fighting off my urge to grieve over this tragedy, I now had to think about the money I had just asked my friends to trust me with.

My account had halved to $2,000 when I went into damage control. I did what I was taught to do and look for well-known safe havens (Gold, Silver, JPY (Japanese Yen), and CHF (Swiss Franc) to sure up any investments I had taken in Britain, but I backed my research also putting more into bitcoin as a new safe-haven investment. After 20 hours of straight work we were back to where we started at the end of day 1, but now holding a very different looking portfolio. Bitcoin was now our primary investment.

My formula started to become eerily accurate and predicted a breakthrough of the psychological resistance barrier of $2,100 within 4 minutes. Suddenly, I was making more from bitcoin than everything else combined. As I can from time to time, I became obsessed with this formula constantly trying to evolve it as growth rates started to exceed the predictions of my formula. I was so consumed in my work on growth rates and trying to overlay Fibonacci sequence to allow for the accelerated pattern, I made a rookie mistake and forgot to look at the downside if Bitcoin experienced a crash or even a correction in the market from technical profit taking. This would come back to bite me later in the week.

By the end of day 4 I had worked approximately 80 hours with only 2 hours sleep here and there where I could pinch it to keep my first clients on track for big profits. I had even managed to work through my own 35th Birthday without even realising. My best friend was excited about the account now hitting 5 figures but worried about my health as 4 days of trading while working on a formula that I couldn’t fix had taken its toll. He insisted we go for a beer and a feed at the pub. Foolishly I was so tired that I fell asleep after the pub without adjusting the now substantial investment I was controlling. By morning bitcoin had experienced a correction, my capital had once again halved overnight.

Battling to deal with such a heavy loss was difficult in my first week, and now I was also trying to combine the theory of evolving mass psychology to explain the correction in the market which my formula had not predicted. But then it hit me. The world might have accepted this as a commodity but I’d already decided it was something different all together.

It was a truly limited commodity which could also be spent or transferred across the world with great speed and minimal cost. I remember thinking when I was doing my research “wow this cryptocurrency will probably replace traditional currencies one day” Eureka, if I believed that it would be much easier to generate a formula to predict where the price might finish and here it is:

Assumption 1. Crypto currencies will represent 50% of the future fiscal economy.
Assumption 2. Bitcoin will hold the equivalent market share that the USD holds in the exiting fiscal economy (approx. 24.3% or US$18trillion)

If you can believe these 2 plausible assumptions than you too can believe that 1 Bitcoin will one day be worth US$428,000.

Bitcoin’s Eventual share of the total future economy (standard and crypto currencies combined inflation not included) US$9trillion. Divide by the number of coins in know existence (21 million).

I’ve read many articles before and since from plenty of professional market analysts prepare to go higher and higher with their predictions but none of which are supported by anything other than guessing for an eye catching headline to their article.

Is it possible the knowledge of a 10 year veteran, has allowed a newbie to write the formula that correctly puts a valuation on the fastest rising commodity in the world, quicker than any professional analyst? I believe it enough to invite you all to investigate bitcoin for yourself and if you believe like I do this is the future of money, open a Bitcoin Wallet and chuck $100 in (if you can afford to). I’m sure it will be a bumpy ride along the way but well worth the risk in this writer’s opinion. And always remember an informed investor is a successful investor.

Fish
The Beach Bum Investor