Bitcoin Is Back

It's been a while since we've talked about Bitcoin in this newsletter, but you may have noticed that the price of the cryptocurrency has come roaring back. It reached an all-time yesterday of $19,920 yesterday and is currently trading around $19,100. That's up from about $7,500 one year ago.

As the digital currency soars, analysts are once again trying to explain the moves, while issuing ever higher price estimates. "But the underpinning of those estimates is still hazy," my colleague Avi Salzman wrote today. 

Bitcoin produces no cash flows and is hardly used for transactions. It’s a software that allows people to transact, and is controlled by no single entity—the software operates on computers set up around the world.

Prices once seemed tied to the difficulty of mining Bitcoin, Avi notes, a process that involves expensive computers and lots of electricity. But Bitcoin fans have moved on to new theories and estimates. 

Michael Saylor, CEO of software firm Microstrategy (MSTR) and a recent Bitcoin bull, said in an interview with Barron’s that Bitcoin solves “a $250 trillion problem” -- that’s the total value of fiat currency in the world, which he thinks is being devalued rapidly because governments are printing money.

If Bitcoin ends up becoming the trusted financial mechanism for solving that devaluation problem, it could be worth half of that $250 trillion, he contends. If it’s total value was $125 trillion, each Bitcoin would be worth about $6 million. “I think it’s possible,” Saylor said.

You can read the rest of Avi's story here.