Bitwise's European division has released a report estimating that Bitcoin's theoretical fair value could be approximately $224,000 per coin. This figure is based on a theoretical framework that views Bitcoin as a hedge against sovereign debt defaults, rather than a definitive price target.
Framework for Valuation
The valuation model originates from analyst Greg Foss, who proposed that Bitcoin functions similarly to a credit default swap for G20 sovereign bonds. This perspective suggests that Bitcoin could serve as a decentralized safeguard against risks associated with government debts, especially as pressures mount on sovereign bond markets.
Key Insights from the Report:
- The $224,000 valuation is derived from analyzing the weighted default probabilities of G20 nations and the market capitalization of the bonds Bitcoin could potentially insure.
- Current challenges for Bitcoin include diminished demand due to changes in the Strategy's STRC funding vehicle and its valuation lagging behind major U.S. tech stocks.
- As of now, Bitcoin is trading around $66,300, down from a peak of over $71,000 earlier this week.
The report emphasizes the increasing stress in the sovereign bond markets, highlighted by record high yields in Japan. The International Monetary Fund (IMF) and the OECD forecast a $29 trillion borrowing from bond markets this year, reflecting a 17% rise compared to 2024. This scenario raises concerns about the sustainability of sovereign borrowing.
