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Author Topic: BAML Fair Value assessment of Bitcoin - Discussion  (Read 1009 times)
unlimited_020
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September 19, 2014, 10:44:09 PM
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In December 2013, Bank of America published a fair value assessment of Bitcoin, giving it a value of 1300USD.

Here is a link to the article: https://ciphrex.com/archive/bofa-bitcoin.pdf

To quickly summarise the article, BAML think that Bitcoin can be used effectively as a medium of exchange, taking market share from the likes of Paypal and Credit Card companies. I found the article very interesting and broadly agreed with BAMLs assessment.

I wanted to create a debate around whether people think the fair value is higher or lower than 1300USD. So please provide some fundamental reasoning behind your answers.
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September 20, 2014, 02:11:29 AM
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This was just a number that somebody pulled out of their ass. How they arrived at that number is anybodys guess.

Its all based on how many people actually USE IT. If people dont USE IT, and there are few goods/services to buy, and obtaining BTC is difficult - then even if the coins are $25k each, Bitcoin isnt really valuable.

Sure, having a $25k coin would be nice but its unlikely unless Bitcoin is able to really change the world. The ideas embodied in Bitcoin - decentralized, peer-to-peer based consensus mechanism, can be applied to a variety of fields which are only now begining to come to light. If those applications pan out, the seeds of Bitcoin could result in a totally open internet, decentralized corporations and governments - exponential efficiency gains. Its use as a currency/payment method is only the beginning.

Bitcoins Fair Value is directly related to how many people are actively using it, not the price.

unlimited_020
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September 20, 2014, 08:55:59 PM
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This was just a number that somebody pulled out of their ass. How they arrived at that number is anybodys guess.

Its all based on how many people actually USE IT. If people dont USE IT, and there are few goods/services to buy, and obtaining BTC is difficult - then even if the coins are $25k each, Bitcoin isnt really valuable.

Sure, having a $25k coin would be nice but its unlikely unless Bitcoin is able to really change the world. The ideas embodied in Bitcoin - decentralized, peer-to-peer based consensus mechanism, can be applied to a variety of fields which are only now begining to come to light. If those applications pan out, the seeds of Bitcoin could result in a totally open internet, decentralized corporations and governments - exponential efficiency gains. Its use as a currency/payment method is only the beginning.

Bitcoins Fair Value is directly related to how many people are actively using it, not the price.

I don't think they pulled the number out of their arse. Yes, the maths behind the figure required a lot of assumptions and guesswork, but their assumptions seemed fairly logical to me.

Are you saying that you think bitcoin will become an international currency? I just don't think this will happen.
pawel7777
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September 21, 2014, 06:27:50 PM
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Thanks for sharing. I've seen articles about this valuation, but never seen the actual doc.


I don't think they pulled the number out of their arse. Yes, the maths behind the figure required a lot of assumptions and guesswork, but their assumptions seemed fairly logical to me.

Are you saying that you think bitcoin will become an international currency? I just don't think this will happen.

I'd also say, that they did pull it out of the ass, but wrapped it up in nicely looking reasoning. They made that valuation when BTC price stopped at around $1200, so their prediction of $1300/BTC looked pretty sensible back then. I can guarantee that if they did the same kind of valuation, say 6 months earlier, the number would be significantly different.

The simple truth is, to make such assessment, they need to do a lot of guessing, like this one:

Quote
What could be the fair value of Bitcoin if it
were to become a dominant medium of exchange for e-commerce that accounts
for, let’s say, 10% of all the payments for B2C transactions?

Why not 2%, or 0.3%, or 20%, or 75.14%? They didn't quite explain that, did they? Or did I missed something.

Also, you can argue with the listed Advantages/Disadvantages, these have been widely discussed on this forum.



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