How $100,000 Per Bitcoin Makes Sense

The recent gains represent some hefty windfalls, but it appears that the party may only just be warming up again for digital assets. Media pundits, once rather camera shy about professing anything other than a vague passing curiosity for all digital assets, have begun to report that Bitcoin may indeed actually reach as high as $10,000 before long. Others still maintain that $25,000 a Bitcoin is not impossible over the next 10 years.

Those recent enthusiastic prophecies reflect the conclusion of a presentation I gave at the Meckler Media conference almost two years ago to the day, back when Bitcoin was in $300-territory (there is a YouTube video of that presentation here). That presentation showed how by performing a series of calculations designed to interpret Bitcoin’s purchasing, speculative and investable value, the average 25-year price of Bitcoin (that’s a 25-year average, remember) was probably around $10,000 a Bitcoin. It also was the first to correctly forecast the rise of smart contracts and crowdfunding-style impacts on Bitcoin’s price. (Before that, in November 2014, I gave a similar presentation in which I estimated by performing the same calculations that the value of Bitcoin by 2017 would be $2,469.55 – which turns out to have been dead on the money. You can download a copy of that presentation here. You can also read my more recent White Paper on Bipolar Market Economics published here at Coinspeaker to better understand the value of Bitcoin and digital currency assets over the long term.)

If the 25-year average is around $10,000, as increasingly looks to be the case, then it is likely that the real 25-year value of Bitcoin is in the region of $100,000 or so.

The reason for this is simply that if you take the price average of any asset, be it a house, a stock, or similar investment, it usually ends up higher than its 25-year average by about a factor of 10. This is after all the reason that long-term debt has such a beneficial impact on the economy vs. short term debt (which merely pump-primes the market with current liabilities that can rarely be amortised). While it is the momentum-bound gains that make for the sudden millionaire next door, it’s the the overall return premium of an asset divided by its long-term average rate of appreciation that makes everyone in society a winner.