Bitcoin Book Value: 48x Price to Book Justified

in bitcoin •  9 months ago

Bitcoin Price to Book Reasonable

Much has been made that only $6-7b has ever gone into bitcoin given its $277b valuation. At second glance this compares favorably to Facebook. Further, If you use accounting valuation, 48x seems about right.

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Facebook book value was $6b in 2011

At the time everyone was abuzz about the $100b valuation Facebook would get upon ipo. Today a mere 6 years later Facebook is worth $500b and book value is $70b.

bitcoin as a company

If you think of bitcoin as a company. The amount of money it takes in each day is profit. All it's expenses are paid through dilution. This money is added to "book value". Accountants know how to deal with this.

bitcoin adding $850m a month to book value.

Or differently put its like a company warning that much or month. At $17k bitcoin is adding $8-900m a month in book value. Assuming that run rate continues that's a 200% roe. If btc can hold this price for a year book value will be around about $16b. In 6 years it would be $76b about what Facebook has now.

But whose addressable market is bigger?

Btc plays on the $50t currency market whereas Facebook toils away in the ad market which is a much smaller subset.

Facebook isn't even number 1 in ads!

That honor goes to google. Bitcoin on the other hand is clearly the top currency market disruptor.

btc justified p/b?

So in finance there is an idea called justified p/b ratio. If an roe is sustainable the p/b = roe - g / (k-g) where g is growth and k is costbof capital.
Let's call growth 6 pct over 100 years, and cost of capital 10 pct, risk free plus a premium. This Implies btc should trade at 48 times book. Eerily this is about $291b or $17100 - exactly where it's trading!

Who knows if this will continue to work. This is not any kind of investing advice- just an observation. Roe could change drastically lower tomorrow. However i thought it was an interesting connection between old finance and crypto finance.

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