Valuation Methods for Bitcoin as an Asset

This document is a research article that discusses various methods for valuing Bitcoin, emphasizing the unique characteristics of this digital asset. It outlines the challenges investors face in determining Bitcoin's fair value due to its lack of cash flows and industrial use. The article presents a framework for valuing Bitcoin, highlighting the importance of supply and demand curves in establishing its long-term value. It details how Bitcoin's predetermined supply schedule and adoption curve can inform valuation techniques, particularly through the application of Metcalfe’s Law. Additionally, the paper discusses the historical popularity of the stock-to-flow model while noting its limitations and the potential shift in focus from supply-side to demand-side valuation methods. The article also addresses concerns regarding the lack of tested valuation methods and fundamentals, which can hinder investor confidence and allocation decisions. Overall, it provides a comprehensive examination of the complexities involved in valuing Bitcoin as a non-sovereign monetary asset.