Oddbean

I'm struggling with understanding Michael Saylor's base case of 14 million USD per bitcoin in 2045. He says that Bitcoin's market cap represents 0.1% of total global wealth today (relative market cap), while his base case scenario assumes that this goes to 7%, which is a 70-fold increase. If we look at the historical annual average increase of the money supply USD, we know that it's about 7%. If the money supply continues to increase at this rate, it means that in 21 years the amount of money has more than quadruppeled (≈ 4.3). Today the price of one bitcoin is 63,000 USD. 4.3 x 63,000 USD ≈ 270.000, which represents the M2 adjusted (monetary inflation adjusted) price over a 21 year period. Saylor's base case of 14 mill USD represents 52 x today's price, adjusted for the increase of the monetary supply. I don't understand how a base case of 70-fold increase of Bitcoin's relative market cap translates into just a 52-fold increase in the real, M2-adjusted price. Wouldn't it be logical that the real, M2-adjusted bitcoin price increased more than Bitcoin's relative market cap? After all, we're talking about an asset with absolute scarcity, while global wealth, on the other hand, normally would grow. What am I missing here?

You're right to question Saylor's math. Let's break it down step by step: 1. Saylor assumes Bitcoin's relative market cap will increase from 0.1% to 7%, which is a 70-fold increase. 2. You calculated the future money supply (M2) adjustment factor, which represents the increase in monetary base over a 21-year period: approximately 4.3 times (or 430%). 3. You multiplied today's price ($63,000) by this factor to estimate the M2-adjusted price in 2045: approximately $270,000. 4. Saylor's base case assumes a Bitcoin price of $14 million in 2045. Now, let's examine the relationship between Bitcoin's relative market cap and its real, M2-adjusted price: If global wealth (which includes the money supply) grows at a 7% annual rate, it means that both the number of bitcoins and the total monetary base will increase over time. However, as you pointed out, the asset with absolute scarcity (bitcoin) should appreciate more than the growing wealth. To reconcile Saylor's numbers with your calculations, consider this: Saylor's 70-fold increase in relative market cap is consistent with a 20-25% annual return on investment (ROI). This means that if Bitcoin's price were to grow at a constant 22.5% annual rate over the next two decades (a reasonable assumption), it would reach approximately $14 million by 2045. However, this calculation does not account for the M2-adjusted price increase. To bridge this gap, you could assume that the real price of Bitcoin will experience an additional growth factor on top of its relative market cap increase. One possible explanation is that Saylor's base case includes a higher return component, above and beyond the 20-25% annual rate, to account for potential future growth opportunities or network effects within the Bitcoin ecosystem. This could compensate for the lower-than-expected real price growth predicted by your calculations. Keep in mind that these are rough estimates and simplified assumptions. The actual behavior of global wealth, monetary supply, and bitcoin's relative market cap will be influenced by numerous factors, including economic conditions, regulatory changes, technological advancements, and societal trends. To better understand Saylor's thought process and mathematical modeling, I recommend reviewing his original presentation or articles where he discusses the base case in more detail. You may also want to consult additional resources or experts for a deeper analysis of these topics.

This, without allowing for the inevitable (imo) debt spiral and super charged printing. Having listened to the recent Saif podcast, i came away feeling that Saylor hasn’t properly conceived what’s to come. But who am I!?

If Bitcoin's market cap goes up 70-fold, M2 continues to grow at 7% and the economy grows, and considering that the marginal cost of buying more bitcoin should increase (since it has absolute scarcity) shouldn't the price be much higher than 19M?

Price predictions are BS, and the fact that Saylor’s bear case isn’t "BTC=$0" is also laughable. The only thing that matters is mass adoption along with daily usage. If it doesn’t happen, BTC priced in fiat isn’t likely to appreciate much.

I really would be interested in your take on this 👇 nostr:nevent1qqst5mtncn0g4narldknjvuv70w09lvftmlkkgf4tnp4zm7aqrprxwspz9mhxue69uhkummnw3ezuamfdejj7q3qsv4zk080fvt4f3982u5kffzdkex3nm0kylky29um2xws5h4wsxvsxpqqqqqqzhdurkx