Initiation of Coverage: Bitcoin EUR (BTC_EUR)

Rating: Buy

12m Price Target: €105,000

Implied Upside: 38.7%

May 24, 2024

1. Key Data & Forecast Snapshot

• Current Price: €75698
• Market Cap: €1,512,589,615,175.50
• 24h Volume: €34,193,516,604.98
• 24h Change: -0.61%

12-Month Forecasts

• 12m Price Target: €105,000
• Implied Upside: 38.7% (calculated as (€105,000 – €75698) / €75698)
• 12m Market Cap: €2,080,000,000,000 (Based on projected price and ~19.8M circulating supply)
• Key Drivers: Institutional adoption, post-halving dynamics, continued regulatory clarity.

2. Investment Thesis

We initiate coverage of Bitcoin EUR (BTC_EUR) with a ‘Buy’ rating and a 12-month price target of €105,000. Bitcoin, the world’s leading cryptocurrency, is positioned for substantial appreciation driven by a confluence of accelerating institutional adoption, its unique digital scarcity profile, and a maturing regulatory landscape. We view Bitcoin as the premier digital store of value, increasingly recognized as “digital gold,” offering a compelling hedge against inflation and a robust alternative asset in a volatile macroeconomic environment.

Why Now?

• Institutional Influx: Spot Bitcoin ETFs in the US have unlocked significant institutional capital, a trend expected to continue globally (Source: Cantor Fitzgerald, Goldman Sachs, SSGA).
• Post-Halving Dynamics: The recent Bitcoin Halving (April 2024) has further constrained new supply, historically leading to significant price appreciation in subsequent months.
• Scarcity Premium: Bitcoin’s fixed supply of 21 million coins, combined with increasing demand, underpins its long-term value proposition.
• Maturing Infrastructure & Regulation: Enhanced custody solutions, clearer regulatory frameworks, and increasing global acceptance are de-risking the asset for broader investor participation.

3. Investment Positives

• Accelerating Institutional Adoption: The approval and success of spot Bitcoin ETFs have validated Bitcoin as a legitimate asset class for institutional portfolios. Major financial institutions are increasingly integrating crypto into their strategies, signaling long-term commitment (Source: Cantor Fitzgerald, Goldman Sachs, SSGA).
• Hard-Capped Supply and Halving Cycle: Bitcoin’s programmatic scarcity, enforced by its 21 million coin limit and predictable halving events, drives its value proposition as a deflationary asset. The recent halving (April 2024) reduced new supply issuance, intensifying its scarcity (Source: Bitcoin Protocol).
• Digital Gold Narrative & Macro Hedge: Bitcoin continues to strengthen its position as a “digital gold” equivalent. Its decentralized nature and finite supply offer a compelling hedge against fiat currency devaluation, inflation, and geopolitical uncertainty, appealing to investors seeking uncorrelated assets.
• Global Network Effects & Security: Bitcoin boasts the most robust and secure blockchain network, supported by the largest computational power (hash rate). This provides unparalleled censorship resistance and transaction immutability, enhancing its trustworthiness and utility.
• Progressive Regulatory Clarity: While fragmented, global regulatory efforts are trending towards greater clarity and acceptance. The establishment of clear legal and tax frameworks in key jurisdictions (e.g., EU’s MiCA, US ETF approvals) reduces uncertainty and fosters mainstream adoption.

4. Competitive/Peer Analysis

Bitcoin vs. Gold

• Similarities: Both are considered stores of value, inflation hedges, and scarce assets.
• Key Differentiators:
  • Portability & Divisibility: Bitcoin is highly portable (transferable globally with ease) and perfectly divisible (down to 8 decimal places), unlike physical gold.
  • Verifiable Scarcity: Bitcoin’s supply cap is algorithmically enforced and transparently verifiable. Gold’s supply, while finite, can be influenced by new discoveries and extraction costs.
  • Transaction Costs: Bitcoin transactions, particularly via Layer 2 solutions like Lightning Network, can be significantly cheaper and faster than transferring physical gold.
  • Custody: Bitcoin self-custody offers sovereign control; institutional custody is digital and verifiable. Gold requires secure physical storage, incurring costs and logistical challenges.
  • Innovation: Bitcoin’s open-source nature fosters continuous innovation in its ecosystem (e.g., Lightning Network, Ordinals).
• Conclusion: Bitcoin presents a superior digital alternative to gold for modern portfolios, leveraging technology for enhanced utility.

Bitcoin vs. Ethereum (ETH)

• Bitcoin’s Primary Role: Digital store of value, hard money, base layer of the crypto economy.
• Ethereum’s Primary Role: Global decentralized computing platform, “world computer” enabling smart contracts, dApps, DeFi, and NFTs.
• Key Differentiators:
  • Monetary Policy: Bitcoin has a fixed supply cap (21M coins) and predictable halving schedule, making it deflationary. Ethereum, after its Merge to Proof-of-Stake and EIP-1559, is deflationary under certain network conditions but does not have a hard supply cap.
  • Consensus Mechanism: Bitcoin uses Proof-of-Work (PoW). Ethereum transitioned to Proof-of-Stake (PoS), which is generally more energy-efficient but raises different centralization concerns.
  • Utility: Bitcoin’s utility is primarily as a store of value and medium of exchange. Ethereum offers broader utility as a platform for building decentralized applications, fostering a vast ecosystem.
  • Risk Profile: Ethereum’s innovation-driven roadmap introduces more technological and execution risks compared to Bitcoin’s relatively stable and focused development.
• Conclusion: Bitcoin and Ethereum are complementary rather than directly competitive. Bitcoin serves as foundational “digital gold,” while Ethereum powers the broader decentralized economy.

5. Estimates & Operating Assumptions

Predicting cryptocurrency prices involves significant volatility and is subject to multiple macro and micro factors. Our estimates are based on current market trends, historical halving cycles, and anticipated institutional adoption.

Price & Market Cap Projections (Year-End)

• End-2024E Price: €98,000
  • Assumption: Continued post-halving momentum, increasing institutional inflows from ETFs, and steady macro conditions supporting risk assets.
  • Market Cap: €1,940,000,000,000 (Based on ~19.8M circulating supply)
• End-2025E Price: €125,000
  • Assumption: Potential peak of the current bull cycle, driven by peak retail and institutional FOMO, followed by some consolidation. Broader integration into traditional finance.
  • Market Cap: €2,480,000,000,000 (Based on ~19.85M circulating supply)
• End-2026E Price: €110,000
  • Assumption: Market stabilization post-cycle peak, consolidation, continued growth in fundamental adoption and utility. Ongoing regulatory clarity.
  • Market Cap: €2,180,000,000,000 (Based on ~19.85M circulating supply)

Key Operating Assumptions (3-Year Forward)

• Institutional Adoption: Expect continued growth in institutional asset managers, corporate treasuries, and sovereign wealth funds allocating to Bitcoin (Source: Goldman Sachs, Pantera Capital).
• Regulatory Environment: Anticipate a trend towards global regulatory harmonization and clarity, reducing perceived risks and expanding market access.
• Macroeconomic Backdrop: Assume continued global economic uncertainty, driving demand for alternative stores of value and inflation hedges.
• Technological Development: Continued scaling improvements (e.g., Lightning Network) and security enhancements will bolster Bitcoin’s utility and resilience.
• Retail Participation: While institutional flows drive significant capital, retail investor interest will remain a strong underlying demand component.

6. Valuation

Traditional equity valuation metrics are not directly applicable to Bitcoin. Instead, we utilize crypto-native metrics that account for its network dynamics and scarcity.

NVT Ratio (Network Value to Transaction Ratio)

• Concept: Analogous to a P/E ratio, it compares Bitcoin’s market capitalization (Network Value) to its daily transaction volume (utility/activity). A higher NVT can indicate overvaluation relative to network usage; a lower NVT can suggest undervaluation.
• Calculation:
  • Market Cap: €1,512,589,615,175.50
  • 24h Volume (proxy for transaction volume): €34,193,516,604.98
  • NVT Ratio: €1,512,589,615,175.50 / €34,193,516,604.98 = 44.23
• Interpretation: The current NVT of 44.23 is within historical ranges, suggesting the network’s value is reasonably supported by its transactional utility, though it’s above bear market lows. Monitoring its trend relative to historical averages provides insight into potential over- or undervaluation.

Stock-to-Flow Model (S2F)

• Concept: The S2F model assesses the scarcity of an asset by comparing its existing supply (“stock”) to its annual production (“flow”). Historically, assets with high S2F ratios (e.g., gold) maintain high values. Bitcoin’s S2F ratio dramatically increases after each halving.
• Calculation (Post-April 2024 Halving):
  • Circulating Supply (Stock): ~19,700,000 BTC (as of May 2024)
  • New BTC per Block: 3.125 BTC
  • Blocks per Day: (24 hours * 60 minutes) / 10 minutes (average block time) = 144 blocks
  • Annual Production (Flow): 144 blocks/day * 365 days/year * 3.125 BTC/block = 164,250 BTC
  • S2F Ratio: 19,700,000 / 164,250 = 119.94 (approx. 120)
• Interpretation: Bitcoin’s S2F of ~120 post-halving significantly surpasses that of gold (~60), indicating extreme scarcity. Historically, higher S2F ratios have correlated with higher Bitcoin prices. This model suggests substantial long-term value potential.

Network Effects

• User Adoption: Growing number of unique addresses, active users, and global penetration strengthens the network’s value.
• Developer Activity: A vibrant developer ecosystem (e.g., Lightning Network, sidechains, ordinals) enhances utility and innovation, attracting more users.
• Security & Decentralization: The strength of Bitcoin’s decentralized mining network (highest hash rate globally) ensures security against attacks, reinforcing trust.
• Liquidity: Deep market liquidity across numerous exchanges and trading pairs, along with growing institutional markets (ETFs), makes Bitcoin easily accessible and tradable.

7. Key Risks

• Regulatory Headwinds: While trending towards clarity, adverse regulatory actions (e.g., outright bans, onerous taxation, highly restrictive frameworks) in major economies could significantly impact sentiment and price.
• Competition: Although Bitcoin holds a dominant position, competition from other cryptocurrencies (e.g., stablecoins, CBDCs) or emerging digital assets could fragment market share or introduce new risks.
• Technological Risks: Although highly resilient, theoretical risks such as a 51% attack, critical software vulnerabilities, or breakthroughs in quantum computing capable of breaking cryptographic standards remain distant but non-zero threats.
• Macroeconomic Environment: A significant global recession, persistent high interest rates, or a widespread “risk-off” environment could reduce investor appetite for speculative assets like Bitcoin, leading to price depreciation.
• Volatility & Market Manipulation: Bitcoin remains a highly volatile asset. Its decentralized and relatively unregulated nature makes it susceptible to large price swings and potential market manipulation, which could erode investor confidence.
• Environmental Concerns: The energy consumption of Bitcoin’s Proof-of-Work consensus mechanism continues to draw scrutiny. Increased regulatory pressure or public backlash could impact its adoption and perception.

8. Appendix

Key Terms

• Halving: A programmatic event embedded in Bitcoin’s code that halves the reward miners receive for validating transactions, occurring approximately every four years. This reduces the rate at which new Bitcoins are introduced into circulation, increasing scarcity.
• NVT Ratio (Network Value to Transaction Ratio): A valuation metric calculated by dividing Bitcoin’s market capitalization by its daily on-chain transaction volume (in USD or EUR). Used as a proxy for valuation relative to network utility.
• Stock-to-Flow (S2F) Model: A model that quantifies scarcity by dividing the total existing supply (stock) of an asset by its annual production (flow). Higher S2F suggests greater scarcity and often correlates with higher value.
• Proof-of-Work (PoW): The consensus mechanism used by Bitcoin, where participants (miners) expend computational effort to validate transactions and secure the network.
• Lightning Network: A “Layer 2” payment protocol built on top of the Bitcoin blockchain, designed to enable faster, cheaper, and more scalable transactions by conducting them off-chain.

Disclosure

This report is for informational purposes only and does not constitute investment advice. The views and opinions expressed herein are subject to change without notice. All investments involve risk, including the potential loss of principal. Investors should conduct their own due diligence and consult with a financial professional before making any investment decisions.

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