Dear Reader,
Elon Musk is often active on Twitter and in media commenting on Bitcoin's and other cryptocurrency prospects. His electric vehicle manufacturer Tesla is accepting payments in Bitcoin. Bitcoin's price recently crashed from above 50 000 USD to close to 30 000 USD.
How to value assets which have little revenue and no or small profits compared to their seemingly excessive current market valuation or capitalization?
Key is to imagine the size of the market correctly. Internet stocks with no revenue during the dot-com bubble were valued at stratospheric levels. Amazon had revenue, but back then it also seemed grossly overvalued. The internet, however, proved revolutionary, profoundly changed our world and the market size currently is estimated at 6 trillion USD. And Amazon is valued at 1.72 trillion USD currently.
Bitcoin is currently revolutionizing finance. And finance is the infrastructure of our world. The banking industry market size is estimated at 3 trillion USD by some analysts. And the blockchain technology backing Bitcoin could change many other sectors of the economy.
Narrative stocks' valuation hinges on correctly estimating the future potential of the market and choosing correctly the first mover advantage leaders there.
Tesla is a case in point. If it succeeds to monopolize the car industry with electric vehicles it can grow into part of its current valuation. If it is to fully substantiate the current pricing of its stock. Tesla has to open up and dominate other markets.
Bitcoin's market size, on the other hand, is huge. I would estimate the market size for which Bitcoin is competing is above 10 trillion USD and that is finance connected only.
A narrative stock's intrinsic value is based on the optionality of the market size and the management fluctuations of the respective company in its fight to dominate the market.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
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.)!
Respectfully yours,
Petar Posledovich
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