Robert Steinadler, a year ago

The fair value of Bitcoin and the rising US inflation

It was yesterday when JPMorgans estimation of the fair value of Bitcoin was discussed in a Bloomberg article. According to Nikolaos Panigirtzoglou the fair value of Bitcoin is lower than the price that BTC is trading for at the time of writing.

Everyone is looking to the Fed to fix the problem of the ever-rising inflation. At the same time, gold is not a hedge against inflation. In fact, the gold price fell -4 % last year. What does that mean for Bitcoin and is it still an inflation hedge?

The fair value of Bitcoin

According to Panigirtzoglou Bitcoin’s fair value is around 38.000 US-Dollars which is roughly 33.200 Euros. But Bitcoin is trading at higher prices and it almost seems that it recovered from the big sell-off that started in December 2021 and continued in January this year.

Many analysts came to the conclusion that BTC is not an inflation hedge at the moment it became clear that the Fed would take action. But the reaction of the market is not a contradiction to the thesis that Bitcoin is an inflation hedge. As long as the music kept playing the Bitcoin price kept pumping.

So, the real question is, is the Fed able to get things under control? They can’t raise rates rapidly without affecting the markets and companies that still depend on low-interest rates. Not to mention the consumers. And a lot of troubles for the economy are not really affected by the monetary policy but by the fact that supply chains are still not working and the global economy is still facing shortages.

A price target of 150.000 US-Dollars

Let’s get back to the Bloomberg article and the long-term theoretical target for Bitcoin. If Bitcoin should reach the same total market value of all gold that is held privately or for investment purposes it could reach a price of 150.000 US-Dollars. That’s not only a huge number, it is also 4.000 US-Dollars more than JPMorgans previous target.

The year 2021 was the year of the biggest money printing in history and gold didn’t manage to keep up. All that it takes is a continuation of the rising inflation in order to make Bitcoin attractive again. There is a chance that the Fed won’t be able for several reasons to change its course so rapidly as many investors expected.

Should that be the case the music will continue to play and the ultimate scarcity of Bitcoin and the impeccable security of its protocol might become the ultimate asset to hold in uncertain times.

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