How is Bitcoin Calculation based on Store of Value?

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With the historical growth in the value of gold and offshore assets, we can estimate the value of gold and offshore assets 10 years (i.e. 2029) later.

As the price of bitcoin changes, the market share of bitcoin value in value reserve gold or offshore assets will also change correspondingly. Therefore, by expecting bitcoin to obtain the market share of value reserve gold or offshore assets, we can expect the bitcoin price to fluctuate range.

According to the World Gold Council, the global gold over the ground at the end of 2017 was approximately 190,040 tons, of which 90,718 tons were jewelry, accounting for 47.7%, private investment was 40,035 tons, accounting for 21.1%, the government investment was 32,575 tons, accounting for 17.1%, and others were 26,711 tons, accounting for 14.1%.

In 2018, the newly produced gold worldwide was 3,347 tons. By the end of 2018, the global gold over ground was about 193,387 tons. Judging from the new annual production, the newly produced gold has reached 2,400 tons to 3,300 tons per year since 2002 and it has kept increasing in recent years.

In 2018, the newly produced gold worldwide was 3,347 tons. By the end of 2018, the global gold over ground was about 193,387 tons.

Judging from the new annual production, the newly produced gold has reached 2,400 tons to 3,300 tons per year since 2002 and it has kept increasing in recent years.

Based on the annual production of 2,800 tons, the global gold over the ground in 2029 will be about 221,387 tons. The current gold price is US$1,296.75 per ounce, so the value will be about 10.13 trillion US dollars. The gold invested by private and official departments will be about 3.87 trillion US dollars.

Based on the aforesaid assumptions, by separate estimations of the ratio of different bitcoin market values to the value reserve gold market value, we can estimate the corresponding bitcoin prices. Under the most conservative assumptions (bitcoin market value accounts for 1% of the gold market value), the bitcoin value is estimated to be about $1,900. Under the optimistic assumption (bitcoin market value accounts for 50% of the gold market value), the bitcoin value is estimated to be as high as US$95,000.

Simply speaking, an optimistic investor may believe the bitcoin market value can account for 50% of the estimated gold market value by 2029 and before, so he thinks the bitcoin price will reach its upper limit of about US$100,00 by 2029 and before.

At the beginning of May 2019, the bitcoin price was around US$6,000 and its corresponding market value was about US$106 billion. The market value of the gold reserve was US$3.38 trillion. The bitcoin market value accounts for about 3.13% of the market value of the gold reserve.

The aforesaid is only based on the gold invested by the private and official departments, which does not include the gold jewelry, the highest proportion of gold over the ground. If this part has been taken into consideration, the bitcoin value is estimated at about US$210,000 when the market value ratio is 50%.

Another important driving factor of bitcoin value is the role of offshore assets. Due to security and privacy, offshore bank accounts are often used as wealth storage. But, it’s not completely safe and private. The good anti-censorship of bitcoin makes it a safer and more secret means of wealth storage. On the other hand, buying bitcoin is easier and more convenient than opening an offshore bank account.

According to the Global Wealth Report released by BCG in 2018, the global offshore assets in 2017 were approximately US$8.2 trillion, an increase of 6% compared to that in 2016. The CAGR from 2012 to 2017 was approximately 5%. If the offshore assets CAGR is calculated at 2.5% from 2018 to 2029, the global offshore assets will reach US$10.8 trillion in 2029.

Based on the aforesaid assumptions, we can estimate the corresponding bitcoin price if we calculate the ratio of different bitcoin market values to the market value of offshore assets separately. Under the most conservative assumptions (the ratio of bitcoin market value accounts for 1% of offshore asset market value), the bitcoin value is estimated at approximately US$5,300. Under optimistic assumptions (the ratio of bitcoin market value accounts for 50% of offshore asset market value), the bitcoin value is estimated at as much as US$260,000.

Simply speaking, an optimistic investor may think the bitcoin market value can reach 50% of the market value of offshore assets by 2029 and before; so he thinks the bitcoin price will reach its upper limit of about US$260,00 by 2029 and before.

At the beginning of May 2019, the bitcoin price was around US$6,000 and its corresponding market value was about US$106 billion. The market value of offshore assets was US$8.4 trillion. The bitcoin market value accounts for about 1.3% of the market value of offshore assets.

Furthermore, if we take the value of reserve gold and offshore assets into consideration, the bitcoin market value accounts for 50% of the total market value of value reserve gold and offshore assets. The bitcoin value is estimated at about US$360,000 (if gold jewelry is also taken into consideration, the bitcoin value is estimated at about US$480,000).

Simply speaking, an optimistic investor may believe the bitcoin market value can account for 50% of the estimated gold market value and offshore assets by 2029 and before, so he thinks the bitcoin price will reach its upper limit of about US$360,00 by 2029 and before.

At the beginning of May 2019, the bitcoin price was around US$6,000 and its corresponding market value was about US$106 billion. The market value of the gold reserve and offshore assets was US$11.8 trillion. The bitcoin market value accounts for about 0.9% of the market value of the gold reserve and offshore assets.

Conclusion

Bitcoin has great potential as a store of value. By comparing bitcoin with gold and legal currency, we can find that bitcoin has shown its potential to become a good store of value apart from its young age and less stability than that gold and legal currency.