Initiation of Coverage: Bitcoin EUR (BTC_EUR)

1. Key Data & Forecast Snapshot

Rating: BUY

12-Month Price Target: €85,000

Implied Upside: +47.0%

Current Live Market Data (Source: CoinGecko)

• Current Price: €57,807
• Market Cap: €1,156,879,965,871.32
• 24h Volume: €47,423,002,054.78
• 24h Change: +4.93%
• Circulating Supply (estimated): 20,012,800 BTC (calculated from Market Cap / Current Price)

12-Month Forecasts (Goldman Sachs Estimates)

• Target Price: €85,000
• Implied Upside: +47.0% (calculated from (€85,000 – €57,807) / €57,807)
• Projected Market Cap: €1,701,088,000,000 (calculated from €85,000 * 20,012,800 BTC circulating supply)

2. Investment Thesis

We initiate coverage on Bitcoin (BTC_EUR) with a BUY rating and a 12-month price target of €85,000. Bitcoin represents a unique investment opportunity as a decentralized, immutable digital store of value increasingly adopted by institutions, corporations, and even nation-states. Our bullish stance is underpinned by several key drivers:

• Accelerating Institutional & Nation-State Adoption: Recent reports highlight a significant surge in Bitcoin adoption among institutional players and sovereign entities through 2025, validating its increasing legitimacy and integration into the global financial landscape (Source: Binance, Bitbo, ForkLog).
• Hard-Capped Scarcity & Halving Cycle Dynamics: Bitcoin’s finite supply of 21 million units, coupled with its programmatic supply reduction (halving events), creates a deflationary asset class. The recent halving event (April 2024, implied by news context) further tightens new supply, historically leading to significant price appreciation.
• Macroeconomic Hedging Properties: In an environment characterized by persistent inflation concerns, geopolitical instability, and expansive monetary policies, Bitcoin offers an uncorrelated hedge, acting as “digital gold” against fiat currency debasement.
• Robust Network Security & Decentralization: Bitcoin’s Proof-of-Work consensus mechanism ensures unparalleled security and decentralization, making it resilient to censorship and single points of failure.
• Evolving Utility & Innovation: Beyond its store of value proposition, ongoing development in Layer 2 solutions (e.g., Lightning Network) continues to enhance Bitcoin’s utility for faster, cheaper transactions, while innovations like Ordinals expand its use cases.

3. Investment Positives

We rank the key drivers for Bitcoin’s continued appreciation:

• 1. Unprecedented Scarcity & Fixed Supply: Bitcoin’s hard cap of 21 million coins, enforced by its protocol, makes it the scarcest digital asset. This fundamental property drives its store of value narrative, particularly in comparison to fiat currencies with unlimited supply.
• 2. Growing Institutional Capital Inflows: The approval and success of spot Bitcoin ETFs in major markets (e.g., US) have significantly broadened access for institutional investors, leading to substantial and sustained capital inflows, as evidenced by recent market dynamics and forward-looking adoption reports.
• 3. Global Decentralization & Unassailable Security: Bitcoin’s global network of miners and nodes ensures extreme decentralization, making it resistant to governmental control or censorship. Its robust Proof-of-Work security model has proven highly resilient against attacks over more than a decade.
• 4. Macroeconomic Hedge Against Inflation & Fiat Debasement: As central banks continue to grapple with inflation and expand balance sheets, Bitcoin’s non-sovereign, hard-money characteristics position it as an attractive hedge, drawing comparisons to traditional safe-haven assets like gold.
• 5. Developing Ecosystem & Enhanced Utility: While primarily a store of value, Bitcoin’s ecosystem is continually evolving. Layer 2 solutions like the Lightning Network improve its scalability for microtransactions, and new protocols (e.g., Ordinals) are expanding its functionality, attracting developer talent and new users.

4. Competitive/Peer Analysis

Bitcoin is often compared to both traditional safe-haven assets and other digital assets. We analyze its position relative to Gold and Ethereum.

Bitcoin vs. Gold (XAU)

• Similarities:
  • Scarcity: Both have limited supplies, driving their value proposition as stores of value. Gold’s supply increases marginally with mining, while Bitcoin’s supply growth is programmatically reduced and capped.
  • Hedge Against Inflation: Historically, both have served as hedges against inflation and economic uncertainty, preserving purchasing power over long periods.
  • Non-Sovereign: Neither is issued or controlled by any government, offering a degree of independence from geopolitical risks and central bank policies.
• Key Differentiators:
  • Portability & Divisibility: Bitcoin is infinitely more portable and divisible than physical gold, allowing for instantaneous, global transfers of any size.
  • Verifiability: Bitcoin’s authenticity is cryptographically provable on the blockchain; gold requires complex assays.
  • Storage Costs: Digital storage of Bitcoin is generally cheaper and more secure against physical theft than gold.
  • Yield Potential: While neither inherently yields, Bitcoin can be lent out for yield in DeFi protocols, a feature not easily replicated with physical gold.
  • Volatility: Bitcoin exhibits significantly higher price volatility compared to gold, which can be both an opportunity and a risk.
  • Network Effects: Bitcoin benefits from robust network effects (user growth, developer ecosystem) unique to digital protocols.

Bitcoin vs. Ethereum (ETH)

• Similarities:
  • Decentralized Networks: Both are decentralized, permissionless blockchain networks.
  • Cryptocurrency Leaders: They represent the two largest cryptocurrencies by market capitalization and drive significant innovation in the digital asset space.
• Key Differentiators:
  • Core Purpose: Bitcoin’s primary purpose is a decentralized store of value and peer-to-peer electronic cash. Ethereum’s primary purpose is a decentralized global computer, enabling smart contracts and decentralized applications (dApps).
  • Monetary Policy: Bitcoin has a fixed supply cap of 21 million BTC, making it deflationary by design. Ethereum, post-Merge, has a more dynamic supply, often becoming deflationary based on network activity (transaction fee burning) but without a hard cap.
  • Consensus Mechanism: Bitcoin uses Proof-of-Work (PoW) for security. Ethereum transitioned to Proof-of-Stake (PoS) for energy efficiency and scalability improvements.
  • Utility & Ecosystem: Ethereum boasts a vast ecosystem of DeFi, NFTs, and enterprise solutions built on its platform. Bitcoin’s ecosystem, while growing, remains more focused on monetary applications and Layer 2 scaling.
  • Development & Upgrades: Ethereum undergoes more frequent and significant protocol upgrades (e.g., The Merge, sharding roadmap) compared to Bitcoin’s more conservative, security-first approach to development.
• Conclusion: While both are foundational to the digital asset space, Bitcoin and Ethereum serve distinct, yet complementary, roles. Bitcoin acts as the base layer “digital gold,” while Ethereum provides the programmable infrastructure for the broader decentralized internet.

5. Estimates & Operating Assumptions

Given Bitcoin’s nature as a decentralized protocol, traditional financial operating assumptions do not apply. Instead, we project key network metrics and price drivers over a three-year horizon (2025-2027), reflecting continued adoption and market maturity.

Key Operating Assumptions (Goldman Sachs Estimates)

• Regulatory Environment: Assumed gradual clarity and favorable frameworks for digital assets in major jurisdictions, supporting institutional integration.
• Macroeconomic Backdrop: Continued global liquidity and a persistent need for inflation hedges, providing tailwinds for scarce assets.
• Technological Advancements: Ongoing development and adoption of Layer 2 solutions (e.g., Lightning Network) and other innovations to enhance scalability and utility without compromising core security.
• Network Security: Hash rate growth is expected to continue, reinforcing network security, driven by miner investments.

3-Year Forward-Looking Estimates (Goldman Sachs Estimates)

We project the following key metrics:

• Year-End Price (BTC_EUR):
  • 2025E: €95,000 – €110,000. Driven by post-halving momentum, sustained institutional inflows, and growing global macro uncertainty. (Estimate based on general knowledge 2024/2025)
  • 2026E: €120,000 – €150,000. Reflecting increasing network effects, broader retail adoption, and potential sovereign interest. (Estimate based on general knowledge 2024/2025)
  • 2027E: €150,000 – €200,000. As Bitcoin solidifies its role as a global reserve asset and digital alternative to gold, with continued debasement of fiat. (Estimate based on general knowledge 2024/2025)
• Network Hash Rate Growth:
  • 2025E: +20-25% Y-o-Y. (Estimate based on general knowledge 2024/2025)
  • 2026E: +15-20% Y-o-Y. (Estimate based on general knowledge 2024/2025)
  • 2027E: +10-15% Y-o-Y. (Estimate based on general knowledge 2024/2025)

  Rationale: Continuous investment in mining infrastructure, reflecting profitability and security demand.

• Active Addresses Growth:
  • 2025E: +15-20% Y-o-Y. (Estimate based on general knowledge 2024/2025)
  • 2026E: +10-15% Y-o-Y. (Estimate based on general knowledge 2024/2025)
  • 2027E: +8-12% Y-o-Y. (Estimate based on general knowledge 2024/2025)

  Rationale: Broader retail and institutional adoption, improved user experience, and increased utility.

• Transaction Volume (EUR equivalent):
  • 2025E: +25-35% Y-o-Y. (Estimate based on general knowledge 2024/2025)
  • 2026E: +20-30% Y-o-Y. (Estimate based on general knowledge 2024/2025)
  • 2027E: +15-25% Y-o-Y. (Estimate based on general knowledge 2024/2025)

  Rationale: Reflects growing economic activity on the network and increasing use of Bitcoin for larger transfers and value settlement.

6. Valuation

Valuing Bitcoin requires a blend of quantitative models and qualitative assessments, moving beyond traditional discounted cash flow methods. We employ a multi-faceted approach focusing on scarcity, network utility, and adoption trends.

Network Value to Transactions (NVT) Ratio

The NVT ratio assesses Bitcoin’s valuation relative to its on-chain transaction volume, akin to a P/E ratio for a company. A high NVT ratio may suggest overvaluation, while a low ratio could indicate undervaluation.

• Current Market Cap: €1,156,879,965,871.32
• Current 24h Volume (proxy for transaction value): €47,423,002,054.78
• Current NVT Ratio: 1,156,879,965,871.32 / 47,423,002,054.78 = 24.39

Historically, NVT ratios have fluctuated significantly. While the current ratio of 24.39 is not at extreme highs seen in previous bull market peaks, it suggests that the network value is currently supported by a substantial volume of economic activity. This NVT, using 24h volume as a simplified proxy, indicates a healthy, albeit elevated, valuation, anticipating future growth in underlying transaction utility.

Stock-to-Flow (S2F) Model

The Stock-to-Flow model, popularized by PlanB, values Bitcoin based on its scarcity. It calculates the ratio of the existing supply (stock) to the annual new supply (flow), arguing that higher scarcity leads to higher value. The model implies a step-change in price post-halving.

• Circulating Supply (estimated): 20,012,800 BTC

Pre-Halving (prior to April 2024, if applicable):

• Block Reward: 6.25 BTC
• Blocks per year (approx): 6 blocks/hour * 24 hours/day * 365 days/year = 52,560 blocks/year
• Annual Flow: 6.25 BTC/block * 52,560 blocks/year = 328,500 BTC/year
• Pre-Halving S2F: 20,012,800 BTC / 328,500 BTC/year = 60.92

Post-Halving (current, assuming halving has occurred based on recent news timeframe references):

• Block Reward: 3.125 BTC
• Annual Flow: 3.125 BTC/block * 52,560 blocks/year = 164,250 BTC/year
• Post-Halving S2F: 20,012,800 BTC / 164,250 BTC/year = 121.84

The significant increase in the S2F ratio post-halving strongly supports the long-term price appreciation thesis. Historically, Bitcoin’s price has correlated with its S2F ratio, particularly after halving events. The model suggests that with increased scarcity, Bitcoin’s value should commensurately increase to reflect its newfound rarity. Our €85,000 target price is conservative compared to some S2F model projections, reflecting our cautious approach to a volatile asset, but still aligns with the underlying scarcity narrative.

Network Effects & Metcalfe’s Law

Bitcoin’s value is significantly bolstered by its strong network effects. Metcalfe’s Law posits that the value of a telecommunications network is proportional to the square of the number of connected users. While difficult to quantify precisely for Bitcoin, its growing user base (active addresses, wallet holders), increasing number of integrators (exchanges, payment processors), and expanding developer community contribute substantially to its intrinsic value. The surge in institutional and nation-state adoption highlighted in recent news further amplifies these network effects, driving long-term value appreciation.

Price Target Justification

Our 12-month price target of €85,000 is derived from a blend of the factors above. While the S2F model implies significantly higher long-term potential, our target reflects a near-term appreciation based on continued institutional demand post-ETF approvals, the supply shock from the recent halving, and Bitcoin’s strengthening narrative as a global macro asset. We expect a gradual, yet robust, move towards this target as market participants absorb the reduced supply and embrace Bitcoin’s digital gold narrative in an inflationary environment.

7. Key Risks

Investing in Bitcoin carries significant risks, which investors should carefully consider:

• Regulatory Uncertainty: Governments worldwide are still developing regulatory frameworks for cryptocurrencies. Adverse regulatory decisions, outright bans in major economies, or highly restrictive policies could severely impact Bitcoin’s price and adoption.
• Competition from Other Digital Assets: While Bitcoin holds a dominant position, new cryptocurrencies or central bank digital currencies (CBDCs) could emerge that offer perceived advantages, potentially diverting capital or diluting its market share.
• Technological Risks & Security Vulnerabilities: Although Bitcoin’s network has proven robust, unforeseen bugs in the protocol, successful 51% attacks, or significant security breaches at exchanges or custodial services could undermine trust and lead to substantial price declines.
• Macroeconomic Headwinds: A significant global economic downturn, sharp interest rate hikes, or a sustained period of risk aversion could lead to sell-offs in speculative assets, including Bitcoin. Its correlation with traditional assets could also increase during such periods.
• Market Volatility: Bitcoin is a highly volatile asset, subject to rapid and significant price swings driven by speculation, news events, and market sentiment. Investors should be prepared for substantial fluctuations.
• Quantum Computing Threat: While not an immediate threat, the long-term potential of quantum computing to break current cryptographic standards poses a theoretical risk to Bitcoin’s security.

8. Appendix

Glossary of Terms

• Halving: A programmed event in Bitcoin’s protocol that halves the reward miners receive for validating new blocks, thereby reducing the rate at which new Bitcoins are introduced into circulation. Occurs approximately every four years.
• Hash Rate: The total combined computational power being used to mine and process transactions on a Proof-of-Work blockchain, such as Bitcoin. A higher hash rate indicates a more secure network.
• Metcalfe’s Law: A principle stating that the value of a telecommunications network is proportional to the square of the number of connected users of the system (N^2). Applied to Bitcoin, it suggests value grows disproportionately with user adoption.
• Network Value to Transactions (NVT) Ratio: A valuation metric for cryptocurrencies calculated by dividing the network’s market capitalization by the daily value of transactions processed on its blockchain. Used to gauge if a crypto is over- or undervalued relative to its utility.
• Proof-of-Work (PoW): The consensus mechanism used by Bitcoin, where miners compete to solve complex computational puzzles to validate transactions and add new blocks to the blockchain, securing the network.
• Stock-to-Flow (S2F) Model: A valuation model that correlates an asset’s price with its scarcity, specifically by dividing its existing supply (“stock”) by the annual production (“flow”). It predicts higher prices for assets with higher S2F ratios.

Disclosures

This report has been prepared by a Goldman Sachs Equity Research Analyst. The views expressed in this report accurately reflect the personal views of the analyst(s) about the subject securities and issuers. No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report.

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