How do you determine the fair market value of a currency that has appreciated faster than the shares of even the hottest technology stocks? This question has befuddled investors and analysts for years when it comes to

Bitcoin Has Value Because People Think It Has Value

How Can This Be? 

expected value (because at least some people believe the underlying technology has the potential to be revolutionary), we can start to make our own estimates about its current 
fair value. 

Bitcoin's Value


Bitcoin's Potential Monetary Base

future monetary base and BTC in circulation, discounted by a "hurdle rate" an investor would require in order to invest in the speculative currency.   Let's assume that in our optimistic case for Bitcoin, the monetary base grows to $1 trillion dollars within ten years, which would represent a fraction of the U.S. dollar's total money supply and about half the value of the global market for gold.  We could then divide this monetary base by the total number of bitcoins expected in circulation by 2024 (thanks to the
future bitcoin into 
present dollars.

Bitcoin's "Hurdle Rate"

Caveat Emptor: Your Assumptions Make All the Difference

The Bottom Line

Note: Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.