Friday, March 22

The PolyCapitalist's New Bitcoin Price Target Is...

As regular TPC readers will know I'm rather fond of alternative currencies like Bitcoin, the Little Virtual Currency that Could.

And so too now is the U.S. Treasury Department's Financial Crimes Enforcement Network, or FinCen.

As the above linked-to WSJ article notes the exchange rate for Bitcoin has been on a tear of late, with the currency trading up 57% during this week alone.

The recent runup in Bitcoin's price has apparently been driven by events in the Eurozone, as well as the additional credibility conferred on the currency now that FinCin has officially acknowledged its interest in virtual currencies like Bitcoin and outlined its criminal enforcement plans. If you're long Bitcoin getting the Fed's attention is apparently a good thing (at least in the short-term).

Now, naturally, readers of blogs like this one have one big question on their minds: where is the price of Bitcoin heading next? 

For the answer to that question I'll turn this post over to the brand new PolyCapitalist Research Department (PCRD), which is my crack team of ambitious research quants. All male 20-somethings straight out of the best schools. Take it away, PCRD!

PCRD: Thank you, TPC. We are very pleased to announce that we are initiating research coverage of Bitcoin with an opening price target of....

TPC: Now, now wait just a minute, hold on there PCRD. As the head of this blog I feel we have a responsibility to our readers. So before you guys go out and announce a price target maybe we should first discuss how you went about valuing Bitcoin?

PCRD: We're so glad you asked us that, TPC, as we put a lot of work into this. First, we developed a rich quantitative data set. For example, we researched what a Bitcoin can buy in the real world and what those items cost in traditional currencies such as U.S. dollars. We also looked at what if any exchange rate conversion expenses exist. And so on.

TPC: That sounds like an excellent start. What else did you do to determine the proper price of a Bitcoin?

PCRD: We next built a rather detailed MS Excel model which factored in other data, such as price trends, liquidity analysis, and other temporal factors.

TPC: Excellent. Did you perform any further analysis?

PCRD: Yes we did. We also stress tested our model by running several different scenarios based around Black Swan type events. For example, we ran a Monte Carlo simulation on the impact to Bitcoin's exchange rate with the euro if Cyprus left the Eurozone.

TPC: Or a Black Swan 'outlier' like another Bitcoin market crash?

Pin-up found in the PCRD cubicles
PCRD: Uh, right!

TPC: Ok, great. So I'm dying to know what price target you guys came up with for Bitcoin?

PCRD: Well, as robust as our modeling was we decided to scrap what the spreadsheet told us and just use the price target set by the guys over at They seem have a better feel for Bitcoin's momentum and how this market is going to play out. They also seem like real stand-up fellas, and they even refer to their "Bitcoin exit strategies".

TPC: Got it. Yeah. Um. Guys, I really appreciate all the work you have been doing but I think we're going hold off on setting a Bitcoin price target for now. Better yet, I think we're just going to close down the entire PCRD.


  1. I'm getting some questions about this post and I'm wondering if it was too 'inside baseball'?

  2. I'm an old Bitcoiner, both in age and in time using Bitcoin. I'm heavily vested in Bitcoin. My price target is buy, buy, buy.

  3. Anon,

    I wouldn't necessarily disagree with your sentiment, although sudden quick moves like the ones we've seen recently aren't for the feint of heart.

    Here's a comment I made yesterday about a downbeat post on Bitcoin over at Niels Eclectic Blog:

    "I would agree with you that the recent Bitcoin price action is reason to raise an eyebrow...but does the recent action we've seen in the Eurozone, with Abenomics and the yen, etc. not also give people a reason to raise an eyebrow about the traditional currencies they are holding?"