We Study Billionaires - The Investor’s Podcast Network TIP260: Bitcoin Math & Value - w/ Plan B
Sep 15, 2019
In a fascinating discussion, Bitcoin expert Plan B reveals how to value Bitcoin using the stock-to-flow model, emphasizing its digital scarcity. He examines the implications of Bitcoin's market potential and contrasts its volatility with traditional assets using the Sharpe ratio. The conversation also addresses the global impacts of Bitcoin adoption and dispels common misconceptions, underscoring the importance of credible resources. Finally, strategies for investing in the Chinese market are explored, offering valuable insights for savvy investors.
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Bitcoin Valuation
- Plan B uses the stock-to-flow ratio to value Bitcoin, similar to valuing commodities like gold.
- This ratio, calculated by dividing the current Bitcoin reserve by the yearly production, correlates with market value.
Halving Impact
- The Bitcoin halving, occurring every four years, reduces the supply of new Bitcoins, impacting the stock-to-flow ratio.
- Plan B's model suggests that after the May 2020 halving, Bitcoin's value could increase significantly, potentially reaching between $50,000 and $100,000.
Bitcoin's Potential Market Cap
- Plan B discusses the potential end market cap of Bitcoin if it were to replace fiat currencies.
- He suggests that a market cap in the trillions could trigger shifts in how value is measured, potentially using Bitcoin as the unit of account.
