One day before the Senate’s digital currency hearing titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies”, BitCoin is largely oblivious to any potential regulatory threats, either at the legislative or the city level, where as reported previously the New York superintendent is in a rush to enforce BitLicenses on businesses that accept BitCoin, and moments ago crossed $500 for the first time ever. Instead, it appears that as we also reported previously, the Chinese BitCoin craze has reached the parabolic threshold, going so far as making BitCoin an acceptable payment for real estate, which means that while for the time being BitCoin becomes the alternative inflation protection medium for hundreds of millions of Chinese, all bets on how high it can get are off.
Intraday chart:
1 Year Chart:
1 Year log chart:
Curious where the demand is coming from? A week ago we showed a handy utility, FiatLeak, which shows where the BitCoin transactions are taking place:
Finally, for those curious what a “fair value” on BitCoin may be, here is what we presented a week ago, courtesy of Global Macro Investor’s Raoul Pal:
So yes: Bitcoin is volatile. Very. That much is clear. But what is not so clear, and perhaps a key reason for this volatility, is just what the fundamental, or intrinsic value of BitCoins is when one strips away the pure euphoric momentum to the upside or downside.
To answer that question, we go to Raoul Pal, head of the Global Macro Investor, and his November 1st recommendation to “Buy Bitcoins”(when BTC was $210 so nearly a 100% return in 1 week) which among other things attempts to “value BTC using a macro framework” or, in other words, the first supply-demand driven fair value assessment of BTC.
His take, and price target, in a nutshell:
    A fudge, but not a stupid one
    Let’s use a broad guesstimate. One Bitcoin should theoretically be worth 700 ounces of gold or pretty close to $1,000,000, if we adjust existing supply of both to equal eachother.
    One BTC is currently worth 0.14 ounces of gold.
    That gives BTC an upside of 5000 times to equal the current price of gold, supply adjusted. Clearly, I and everyone else believes that Gold may well be much higher than here in the next 5 to 10 years, thus versus the US Dollar the upside for BTC could be multiples of that.
    Now, before you shake your head, simply go back to the chart of Gold versus the US Dollar and just recognise that it has risen 8750% since the 1920s. And just remember that Microsoft rose 61,000% from its IPO to it’s peak.
    Considering what we know about the world, I personally believe that Bitcoin may well explode in value as more and more people begin to use it.
    If you stuck $5,000 into Bitcoins and each Bitcoin did go up to a gold equivalent of let’s say, only 100 ounces of gold (not the potential fair value of 700), then at current prices your Bitcoin stash would be worth $3.3m.
    Now that’s what I call a tail-risk option. It’s either worth zero or it’s worth a truly outstanding amount of money.
    I bet you never thought you’d see this in a macro publication. But I’m serious. This just might work.
BitCoin Rises Over $500