Blockchain Worldwide Tour: 5th stop- Surfing Bitcoin 2022 at Miami-Investments Insights Report & Beyond
What is the Intrinsic Value of Bitcoin?
“Price target in 2030 for Bitcoin is more than $1 million.”
-Cathie Wood
History has been made; Satoshi Nakamoto set in stone the Digital Gold via Bitcoin & separated money from the state to create freedom. Off the Chain Capita stated “We are all Satoshi Nakamoto”.
During my Covid gateway surfing trip in San Clemente, California I met Winston Robson, the Metaverse Master and CEO of Wemeta. A few months later, he texted me asking me if I was going to Bitcoin 2022. In my mind, mixing Miami and Bitcoin sounded like a hype party mode, but I gave it the benefit of the doubt and looked it up. This is when I saw that Bitcoin 2022 was going to host prominent asset managers as speakers such as Thomas Lee, Kevin O’Leary, Michael Saylor. In addition, OG developers Adam Beck and Nick Szabo would be speakers as well. This peaked my interest and increased my level of conviction that the conference was going to provide a wealth of knowledge and dive into the granularity of the intrinsic value of Bitcoin. My soul was set on fire and I decided to surf on over to Bitcoin 2022 at Miami, making it the 5th stop on my Blockchain Worldwide Tour.
I. Key Investments Insights
The dominant narrative
“Global multibillion-dollar companies are waiting for the regulatory framework of cryptocurrencies”
-Kevin O’Leary
-This statement was further reinstated by a majority of other speakers at the conference. Each one implying that Bitcoin will gradually increase in price and then suddenly it will rise exponentially.
The pinnacle moment
Announcement: Strike’s partnership with Shopify
-This announcement was a tectonic shift for hyper-bitcoinization as it resembles dollarization but with Bitcoin and it was a main theme at the Conference.
-The goal is that SATS (smallest denomination of Bitcoin) is going to be the new denomination for payments.
-Lightning Network, the payment network of Bitcoin, is finally now embedded in the Bitcoiner’s life.
Top Takeaway
Taproot upgrade will unlock the power of Bitcoin to a multi-asset world
-The Taproot upgrade will make the Taro protocol technically possible.
-This upgrade envisions Bitcoin as the currency of total domination of the world with the integration of stablecoins as well as other coins in the Lighting Network.
-The Lighting network development will radically shift Bitcoin from having store value to network effect value.
II. Investments Insights from the community, ecosystems & speakers.
Expo Hall in Bitcoin 2022
- Michael Saylor noticed there was more institutional movement investing in Bitcoin as seen by Tesla and other companies buying Bitcoins. In fact, Michael Saylor‘s fund, MicroStrategy invested $250K in Bitcoins and turned it into $6 billion. Probably nothing!
- During the Billionaire Deep Fireside Chat, it was mentioned that there is not enough Bitcoin for all the millionaires of the world and presented a graph that showcased only 25% of USA households own Bitcoins as of 2/18/2021.
- Global government acceptance and regulatory framework for cryptocurrencies is increasing. During Bitcoin 2022, Prospera, a Caribbean Island off the northern coast of Honduras, announced that Bitcoin will be adopted as a legal tender.
- The community and ecosystem of Bitcoin is starting to shift its mindset towards the notion that Bitcoin is far more powerful than just serving as digital gold, and they have started to envision a multi-asset platform supported by the Taproot upgrade.
- Several big figures in sports have become Bitcoin athletes, including Serena Williams, Aaron Rodgers, and Odell Beckham Jr, which is a bold decision as they are choosing to be paid in Bitcoin.
- Bill Barhydt, the founder of Abra, stated that the future of money is having Bitcoin as the pristine collateral.
- The expo hall at the conference was a vibrant ecosystem mainly filled with mining companies and crypto wallets, with the integration of the Lighting network.
- Generally speaking, the expo hall had an indirect message in showing how bitcoin seamlessly is becoming a method of payment at the enterprise level.
In summary, all the parties of the economy are plugging into Bitcoins representing that the optimist’s sentiment and social immune systems of Bitcoin are real. Thus, with more users/active addresses entering the Bitcoin Network and with its fixed supply, this will lead to alpha in Bitcoin.
The message from Bitcoiners is buy &…
As you know, my goal in 2022, is to find the ultimate platform that will unify the dominant smart contract platform. At EthDenvern 2022, I found a strong solution, Octopus Network, which is a good investment. However, in the blockchain space, there is no silver bullet. There are other great solutions as well, including, LayerZero and Nomad. Nevertheless, there has been some interesting developments in Bitcoin such as:
- The $1 billion US “Bitcoin Bond” on the Liquid Network, which is Bitcoin layer-2 designed by Blockstream.
- The taproot upgrade
These developments are leading Bitcoin to add smart contract capabilities. Crypto history dictates that interoperability comes with smart contact platforms. The fact, that Bitcoin is the largest market capitalization holding around 40% of the cryptocurrency market, indicates that Bitcoin has more power to unify the dominant smart contract in the long term. Thus, I attended the open-source stage.
Investments Insights of Taproot upgrade: Bitcoin paradigm shift
Taproot upgrade is Bitcoin 2.0?
Taro protocol is the transition of Bitcoin from digital money to a multi-asset network.
The main concern of Taro protocol:
How can you ultimately enable security and scalability when issuing coins in the Bitcoin Network? There is a tradeoff of security, privacy, and scalability.
Ultimate solution:
Taproot upgrade
From my standpoint, the Taproot upgrade is the Bitcoin 2.0. The Taproot upgrade enables privacy (revealing the ultimate condition that is used) and scalability (input less data on-chain) without scarifying the core value of the base layer.
The best uses cases to build:
- Issue stablecoins
- DeFi applications
- The Taproot upgrade is expected to be finished in about 1–2 years according to Olaoluwa Osuntokun, Lightning Labs’s CTO.
- Taproot is a gamechanger and it is the most expected devolvement at hand as it will enable the building of stablecoins, which will accelerate the growth of the Bitcoin payment network, Lighting.
- With the completed Taproot upgrade, it will have high odds in becoming the catalyst for mainstream adoption of bitcoin as a payment option.
- In the end, it enables the out-bounded goal of Bitcoin: “The goal is to have Bitcoin be the underlying global monetary network powered by open protocols” stated by Elizabeth Stark, Lightning Labs CEO & Founder.
Overall, nowadays is the time to capitalize in this ultimate cutting-edge development in Bitcoin and invest. The best way to invest in the Taro protocol is to invest in Bitcoin.
Investment Insights of the leading protocols in Bitcoin
Bitcoin Protocol Ecosystems
How to unlock the power of Bitcoin? Ultimately, there is a misconception, every potential solution has been built on top of Bitcoin. Everything happens in the protocol layer in Bitcoin and the base layer stays with the core values in most of the protocols.
Leading protocol in the Bitcoin ecosystems
1- Layer 2
- The Lightning Network is a payment protocol layer built on top of Bitcoin that enables faster and cheaper Bitcoin payments.
- Payment channel networks and the ecosystem in Lighting Network have a significant growth based on Arcane Research.
- “The Lighting Network is not reliable and scalable 100% for big businesses albeit they are working hard toward it” as mentioned by Graham Krizek, Founder and CEO at Votage.
- Mainly the proliferation of the Lightning Network will be with user experience based upon discussions in the open-source stage.
2- Sidechains
-Liquid Network — https://liquid.net/
- The Liquid Network enables the issuance of security tokens in the Bitcoin platform.
“The Bitcoin Bond represents the start of a reformation of capital markets, built on Bitcoin and layer-2 technologies like the Liquid Network.”
-Blockstream
-Stacks- https://www.stacks.co/
- A sidechain that leverages Bitcoin for block checkpointing in order to build decentralized apps and smart contracts by using a proof of transfer consensus mechanism. Stacks protocol has its own coin.
-RSK — https://www.rsk.co/
- A sidechain that leverages Bitcoin for block checkpointing to build decentralized apps and smart contracts and uses the consensus protocol, DECOR+, a unique variant of Nakamoto Consensus, with the capability to merge-mine with Bitcoin or any other blockchain sharing the Bitcoin block format and proof-of-work stated by https://www.rsk.co/faqs. Rsk protocol has its own coin.
In summary, the mindset of the Bitcoin protocol ecosystems is Bitcoin-centric. For instance, Bitcoins on the Liquid Network are verifiably backed 1:1 by bitcoin on the Bitcoin mainchain as stated on the Blockstream website. In comparison, stacks and rsk protocols have their own coins. Thus, the best way to invest in the most protocols within the ecosystems is by investing in Bitcoin itself.
Shout out to Lucas Nuzzi for demystifying me and keeping us updated on the status of the ecosystem of Bitcoin. For more information go to https://www.ekosys.org/.
III. Intrinsic Value of Bitcoin
“The fair value of Bitcoin is $100k based upon our 4 valuations models.”
-Brian Estes
I personally asked Brian Estes, “what is the intrinsic value of Bitcoin” as he has a wealth of knowledge in value investing in crypto validated by maintaining the #1 Performing Blockchain Fund over the past 5 years in the HFRI Universe (hedge fund research and indices) using the investment style of Benjamin Graham and Warren Buffet in his Off the Chain Fund,
The valuation models for blockchain networks that are most likely to become the standards are:
- Metcalfe’s Law
- Stock-to-Flow model.
The most well-known entities that opted-in to apply these two models are:
- An Association for Investment such as CFA
- An Association for Finance Professionals in a Data-Driven Industry like the FDP Institute
- A Wall Street asset manager such as Tom Lee
- A Global macro investor like Raoul Pal
Generally speaking, they inputted more weight into these valuation models due to the fact that they have a higher correlation between the actual price of Bitcoin and the predicted model.
It is worth mentioning, that my 2017 Master’s thesis in Blockchain in the UK demonstrates that the fundamental models in cryptocurrency have a predicting power for the price of cryptocurrency even when the technology is nascent. Thus, my thesis reaffirms that value cryptocurrencies with Metcalfe’s Law and Stock-to-Flow are reliable approaches.
Currently, Bitcoin is a digital store value suggested by having 500,000 addresses that are exhibiting long-term behavior stated by Ark Invest Management LLC. Thus, Bitcoin being a store of value indicates that it is more suitable to value Bitcoin with the Stock-to-Flow model.
The Stock-to-Flow model shows that the value of Bitcoin is around $100k per Bitcoin
The Stock-to-Flow model shows that Bitcoin is a store of value and is strongly undervalued.
- The model essentially states that scarcity drives value. This valuation model has a strong positive linear relationship between the actual price of Bitcoin and the predicting model.
Metcalfe’s Law shows that the value of Bitcoin is around $48k per bitcoin.
Metcalfe’s Law shows that Bitcoin is not significantly undervalued.
- Metcalfe’s Law states that the value of a network is proportional to the square of the number of connected users/active addresseses.Metcalfe’s Law valuation model has a strong positive linear relationship between the actual price of Bitcoin and the predicting model between 2014–2017. From 2017–2021 the level correlation of Metcalfe’s law model has been reduced.
- In his presentation, Brian Estes stated that the most likely reason for the reduced level of correlations in Metcalfe’s Law model is, from 2017 when short Bitcoin was introduced as an investment opportunity and received negative government branding.
In summary, by comparing both valuation models and identifying a higher correlation in the Stock-to-Flow model, it is fair to say that Bitcoin is undervalued. This is my standpoint as of today, based on the more reliable and well know valuation models for Blockchain Networks and all the factors aforementioned,
Bitcoin's intrinsic value is between $90k –$100k.
Lastly, a piece of confidence regarding the value of Bitcoin, is the fact that the OG developer Adam Back is still extremely active in Bitcoin’s development with the Blockstream Company. This validates my blockchain investment thesis which states that the intrinsic value of blockchain is based on the symbiotic relationship between the network effect value and OG developers.
To solidify the view that Bitcoin is undervalued, Token Metrics an AI-driven crypto research platform stated (Book: Crypto Investing Guide by page-43):
“At 65% (overall market cap), seems costly. If Bitcoin dominance ever fell near 40%, then we assume Bitcoin is cheap and it could set up a Bitcoin price rally.”
- Ian Balina & the Token Metrics Team
Scenarios for the value of Bitcoin for 2030
1-Hiphotethically speaking, what is the value of Bitcoin if it takes a percentage of the global market assets?
$1 million per Bitcoin or more in 2030 according to Ark Invest
Bitcoin’s market capitalization still represents a fraction of global assets and is more likely to increase by around $27.4 trillion in 2030 as we see clear regulatory framework and is accepted as legal tender according to Cathie Wood of Ark Invest Management LLC. Thus, it is expected that smart money will be heavily invested in Bitcoin.
“Bitcoin is going to change the world, Bitcoin is the first, global, private/no government involvement, and digital rule-based monetary system in the history of the world.”
-Cathie Wood
2-Hypothetically speaking, what is the value of Bitcoin if 500k active addresses will be added as a result of the Taproot upgrade by 2030?
It’s fair to affirm that Bitcoin will become scarcer and the price will increase exponentially.
The price of bitcoin today is around $43k, and its value will most likely reach far beyond that price due to the potential increase of the network effects with the Taproot upgrade.
Bitcoin valuation final thoughts: personally speaking, I don’t know who Satoshi Nakamoto is nevertheless, I strongly justify that most of the value of Bitcoin can be reflected…
Investments Insights of Bitcoin on-chain data: The Future of Financial Forecasting
“Bitcoin on-chain data is eye-catching as you can analyze in a level of granularity of the transparent immutable ledger to forecast the price of Bitcoin.”
-Will Clemente
The key metrics of Bitcoin on-chain data based on the panelist:
1-Cost basis metrics
Market Value to Realized Value (MVRV) ratio
- Currently, the MVRV ratio is at 1.62 as of April 2022, indicating that a smaller degree of unrealized profit is in the network. Thus, more likely this is a market signal that Bitcoin is undervalued and poor demands because MVRV ratio is closer to 1.
2-Profit and loss metrics
Lond and Short Term Holder in Profit / Loss Ratio
“We can see an approximately even split of 15.2% LTH : 15.0% STH, with a total of 30.2% of the coin supply held in loss. We can however see that compared to the May-July 2021 period; market profitability is in a worse position”.
-Glassnode newsletter, Short-Term Pain, But Long-Term Gain? As of April 19, 2022
3- Capital flows in exchanges
Exchange Net Position Change indicator
“Exchange outflows have reached a rate that has only ever occurred 3 times before in Bitcoin’s history: following March 2020, December 2020 (a lot of which was likely GBTC), and September 2021.”
-Will Clemente’s Blockware Intelligence Newsletter: Overview of 4/8/22–4/15/22
- Therefore, there is a strong accumulation of Bitcoin on-chain, which may validate that the market sentiment is optimistic for Bitcoin, due to people depositing their bitcoin in their crypto wallets.
In summary, according to the 3 key metrics of Bitcoin on-chain data, based on the panelist, Bitcoin is relatively undervalued. Thus, despite the macroeconomic risk like the Ukraine war & increase in Fed Funds Rate, Bitcoin on-chain data suggests that is a good time in the market cycle to accumulate Bitcoin. The panel agrees that Bitcoin will become a macroeconomic economic indicator.
“Bitcoin on-chain data is a price forecasting tool that is becoming overtime a macroeconomic indicator.”
-Will Clemente
Conclusion
Decrypting the value of blockchain technology, in all likelihood, this space will evolve to become the largest and most prominent sector in the world over the next decade.
Bitcoin is the flagship of cryptocurrencies, it is currently in its growth stage for mass adoption and it will start to become a macro-economic indicator.
- The major factors increasing the value of Bitcoin are the inflation hedge, Lightning Network development, and institutional adoption.
- The investment insights from the conference, valuation models, and Bitcoin data on-chain validate that Bitcoin is undervalued and it is currently a superior time in the market cycle to invest in Bitcoin with the investment strategy, dollar-cost averaging.
Bitcoin 2022 key message in the Investment Perspective is:
*Surf the next big wave of Bitcoiners with the global multi-billion companies entering the space and new users in the Lighting Network. As result in all probability will be the eclipse for compound parabolic alpha.
My prediction for Bitcoin is that will become World Reserve Cryptocurrency after I witnessed the transition of electronic cash to a store of value & due to the factors aforementioned. In fact, Luna protocol has already initiated this monumental shift. A sign of what is to come:
“Luna Foundation Guard’s (LFG) decision to create a bitcoin-denominated reserve as an additional layer of security for UST — Terra’s decentralized stablecoin, whose value is pegged 1:1 to the U.S. dollar.”
-Coindesk
Ethos of Bitcoiners
Buy bitcoin, focused on laser eye vision, and give the orange pill for economic empowerment.
We are all Satoshi Nakamoto!
One of the most outstanding NFTs in the expo hall
Decoding the Bitcoin full node Sculpture
My gratitude goes out to the Team Bitcoin Magazine and David Bailey, who since 2014 has advocated for bringing a cohesive community and ecosystem of Bitcoiners closer together. Shout out to Miami for being an instrumental force in making this event unfold and for becoming one of the leading states in Bitcoin adoption.
Bitcoin Magazine, I was wondering, where Bitcoiners meet in the metaverse?
Recall, in the crypto world, the more you know, the richer you can get! 100x & beyond…
Special thanks to Winston Robson, who sparked a fire in me and propelled me with vitamin sea to surf the Bitcoin 2022.
Shout-out to Ashley Leal for the thoughtful feedback.
May the force be with you’ll!
P.S. I’m currently conducting a Blockchain Worldwide Tour, titled 100x & beyond. It is worth noting, that I am a blockchain global citizen and I am a Bitcoin Maximalism from the standpoint of Bitcoin is digital gold. My investment philosophy is focused on value investing.
Disclaimer: This is not constitutional investment advice. The investment opinions and the latest insights expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investing, or other advice. Investing in crypto assets comes with a risk of financial loss.
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