A recent research report by Wedbush Securities projects a 12-month bitcoin price target of $400, implying a 32% upside from current prices.
Formal coverage of bitcoin prices by institutional securities or research firms is hard to come by. Except for periodic reports by CitiFX, Citi’s foreign exchange division, most forecasts have informally emanated from commentators from within and external to the industry.
Gil Luria, who co-authored the Wedbush report along with Aaron Turner, writes, “At this point, with all the investments from big exchanges and VCs, I thought it was worth tackling the tougher question of how to value a bitcoin.”
The report, obtained by CoinDesk, was actually part of the firm’s initiation of coverage on Bitcoin Investment Trust (BIT). Its shares, launched earlier this year on the US OTC markets, each represent the value of 0.1 bitcoin. GBTC is thus given a $40 price target and an ‘outperform’ rating.
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The figure assumes a direct correlation between bitcoin prices and GBTC shares. Until now, however, investors have paid a premium for the shares relative to their fair value, although the gap has been recently shrinking.
Assets whose market prices are driven by sentiment and speculation, such as gold (at least partially), are notoriously difficult to evaluate. Nevertheless the report’s authors attempt to arrive at a fair value for bitcoin. They assess a $6 billion market cap, implying $400 a coin, by Bitcoin supplanting roughly 2% of the volume of major global payments processors, whose market caps total close to $300 billion.
However, they express caution. For each 0.01% change in the perception of bitcoin’s eventual value, prices can fall by $100. Bitcoin can even hit $0 as part of unpredictable price moves. Significantly, there is a 50% chance that Bitcoin can be replaced by a better distributed ledger system or rendered unusable by a fatal flaw or becoming illegal. Yet, there is a 49.98% chance that Bitcoin will become the solution for its intended applications, and a 0.02% chance that it will become the “global working capital of trade”, in which case each coin can be worth as much as $1 million.
By 2025, the report expects bitcoin to account for 10% of the $5.9 trillion online payments market, 20% of the $744 billion remittance market and 20% of the $924 billion microtransactions market.