Disclaimer: Publishing this blog to highlight true potential of Bitcoin, but not to go with the flow on soaring prices of cryptocurrencies right now.
I am taking a mid-path of highly statistical GARCH estimation models and guesstimates based on global money supply, backed by rigorous follow-up and research on cryptocurrency fluctuations caused by
- Scaling (SegWit2X, Byzantium)
- Economic and political uncertainties (India demonetization, Venezuela crisis)
- Increased inflow of institutional money (Sweden’s regulated bitcoin investment, Bitcoin going mainstream in Japan etc.)
- Emotional trading tides, etc.
Combing the above focus and curiosity on future of cryptocurrencies, I have developed an estimation model offering a framework to extrapolate future value of cryptocurrencies.
Starting point: Analysis and estimation is limited to 3 cryptocurrencies – Bitcoin, Ethereum and Litecoin
- Global supply of money: Analyzed the current global data on Coins/Notes/ Bank Reserves, (Savings + Time) Deposits, Time Deposits (24+ Hours to Liquidate), Gold + Diamond + Other Assets. As shown in the chart a total global supply of $93 Trillion is considered which dictates the current Purchasing Power Parity (PPP) of the globe.
- # Coins currently mined: Captured the data on # Coins currently mined, which is ~16.6 million Bitcoins, 95 million Ethereum, and 53.5 million Litecoin
- # Coins – known maximum: Captured the data on current known maximum # Coins potentially mined, which is capped @ 21 million Bitcoins, 210 million Ethereum, and 84 million Litecoin
Scenarios: Providing 3 scenarios covering the perspectives of last one year known lows, current market peaks and exploratory factor analysis based near future value computations. The near future can be considered as 3 to 5 years period starting November 2017. Each scenario depicts the % total global USD supply, volumes, price and market cap of each of 3 cryptocurrencies.
Am I encouraging to invest in Bitcoins? – Probably NO
Am I encouraging you to develop your model of estimation? – Absolutely YES
- Scenario A: Looked at lowest known prices of 3 cryptocurrencies over last one year (i.e. starting October 2016) and developed the Scenario A.
- Scenario B: Looked at the known maximum market prices hit by 3 cryptocurrencies and developed the Scenario B.
- Scenario C: Developed an estimation model based on exploratory factor analysis (EFA) computing the potential future value of cryptocurrencies in in next 3 to 5 years. The factors considered include, step crypto rates of appreciation based on historical values. probability and share of global currency in circulation replaced by cryptos, percentage treatment of crptos as assets compared to gold, real estate and others, weights of crypto funds – futures and options, quantum of government regulated investments, convertibility into other tokens, etc.
The following are the future estimates of 3 key cryptocurrencies,
- Bitcoin: $44000+
- Ethereum: $1100+
- Litecoin: $220+
I have estimation models developed for other large cryptocurrencies as well. Reach out to me for further discussion on estimation model and considerations.