Bitcoin Valuation!

Dear Reader,

Here I am going to attempt the (almost) impossible - to value Bitcoin.

Currently the digital currency Bitcoin, yes I think it is actually a currency, trades at 14771.75 USD.
The Commodity Futures Trading Commission thinks Bitcoin and other crypto currencies are commodities. That is why this Sunday the Cboe Global Markets Inc. will start trading futures on Bitcoins.

Why do I think Bitcoin is curency? The definition of a currency is: unit of account, store of value and means of exchange. Actually Bitcoin would cover all three attributes if it was regulated. Currencies which have a central bank and respectively a government standing behind them tend to store value because the central bank ensures the currency(USD for example) stores value by targeting stable inflation rates, usually 2% change in  the price level year on year. Actually, if Bitcoin did not fluctuate so much it would cover all three pillars of the definition of money.

However if the central banks(governments) start regulating it would Bitcoin lose its appeal? Possibly.

So what is the 'correct' price of Bitcoin? Since there is no cash flows behind Bitcoin the traditional valuation methods do not apply! So, basically I think technical markets analysis should come in handy here. Whenever Bitcoin breaks through resistance levels like let's say round numbers like 20 000 USD or 50 000 USD the probability of Bitcoin's value rising increases. There is some fundamental touch, though. This is the choice of governments. If governments decide in tandem they could shut Bitcoin down and drive its price to 0 (zero).

I think Bitcoin will hit 100 000 USD and then crash by more than 30%. If governments do not shut it down, after the fall Bitcoin should start slowly rising again.
 

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Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!


Kind regards,
Petar Posledovich