Thread by @gametheorizing

1/
Here is my framework for estimating the change over time in the fundamental price of $BTC.

I touched on this on the pod w/ @DougPolkVids yesterday.

Price = D * N * H

(Dollar Devaluation Level) *
(Network Adoption Level) *
(Hard Money/Utility Level)

Here's what it means:

2/
Dollar Devaluation Index is the simplest-

We must track $ devaluation since prices are denominated in it. Lets say = 8% a year starting in 2016 and 16% since 2020:

2016: 1.00
2017: 1.08
2018: 1.17
2019: 1.26
2020: 1.36
2021: 1.58
2022: 1.83

3/
Network adoption Level- not just number of users, its more like:

= % of world GDP accepting/owning BTC

GDP including :
Market Cap of co's accepting it,
+% Of the population owning it,
+ GDP of Countries declaring it legal tender.

Some minus points for countries banning it

4/
Some approximation for N at start of each year:

2016: 1% (niche)
2017: 3%
2018: 10% (retail explosion)
2019: 7% (regulation bump)
2020: 11%
2021: 19% (another retail explosion, some institutional)
2022: 28% (institutional + some country - some regln)

5/
And we get to 'Utility'. This is the one I find the most interesting.

Ultimately, Bitcoin is a product. We know the Supply as it is mathematical based on miner emissions- but the Demand we have to judge.

There has been speculative demand, but that is not fundamental..

6/
$BTC 's fundamental value is maintaining and transferring wealth, when is that valuable?

If central banks are constrained, and international capital flows are easy, there is little value- People can just use fiat.

What about when the economy is overheated by money printing?

7/
This was the case in H2 2020 and throughout 2021, when fiat got devalued big time.

But growth equities kept pace comfortably, commodities of all sorts went up, and even bonds did fine. Not to mention altcoins.

Hard money was actually not needed bc everything else worked.

8/
Hard money ultimately is needed as a safe haven, and there is a reason gold has been called this traditionally. In the 1970s when we had stagflation, gold exploded as hard money was needed desperately.

Inflation in the high digits, while growth in the economy stagnates.

9/
That is an environment that crushes growth equities, bonds collapse as interest rates have to get raised, and speculative assets run into a liquidity crunch.

There are no certainties, but there are many signs that we could be entering such an environment imminently.

10/
So while the need for hard money has been relatively low for years, we could be entering a zone of exponentially higher utility.

While Gold is likely to do well as it traditionally does here, BTC will have its crack at being the new better version.

11/
W/ a 2016 base of $1k and ignoring Hard money utility, the estimated fundamental value at start of year were:

2016: 1.00 * 1% = $1k
2017: 1.08 * 3% = $3k
2018: 1.17 *10% = $12k
2019: 1.26 * 7% = $13k
2020: 1.36 *11% = $15k
2021: 1.58 * 19% = $30k
2022: 1.83 * 28% = $51k

12/
What to expect for the next few years if we do indeed get stagflation? In the 1970s version, gold went up ~60% per year 1971-1974.

Assuming devaluation goes back down to 8%/year and adoption continues at 5% a year, here are some rough fundamental (not price!) estimates.

13/
2023: 1.97* 33% * (1.6 Hard premium) = $104k

2024: 38% * (1.6^2 Hard premium) = $207k

I'd continue and do an estimate for 2025, post halving..

..but then @CryptoCred and @CryptoDonAlt would start calling me "PlanC"