Initiation of Coverage: Bitcoin EUR (BTC_EUR)

Key Data & Forecast Snapshot

We initiate coverage on Bitcoin (BTC_EUR) with a Buy rating and a 12-month price target of €102,500. Our positive outlook is underpinned by Bitcoin’s accelerating institutional adoption, continued scarcity following the recent halving, and its evolving role as a digital store of value.

• Current Price (BTC_EUR): €79,529 (Source: CoinGecko)
• Market Cap: €1,589,397,983,008 (Source: CoinGecko)
• 24h Volume: €32,122,193,545 (Source: CoinGecko)
• 24h Change: -2.95% (Source: CoinGecko)
• 12m Price Target: €102,500 (GS Research Estimate)
• Implied Upside: +28.88%

Investment Thesis: Why Now for Bitcoin?

Bitcoin stands at a pivotal juncture, transitioning from a niche digital asset to a recognized institutional investment. Key catalysts are aligning to propel its next growth phase.

• Accelerated Institutional Integration

  The approval and success of spot Bitcoin ETFs in major markets (e.g., US) have significantly broadened accessibility for traditional financial institutions and their clients. This integration into Wall Street’s infrastructure is driving substantial new capital inflows and legitimizing Bitcoin as an investable asset class. Fidelity Digital Assets and other experts anticipate increased institutional adoption through 2026, fueling a bullish cycle (Source: CoinDesk, AInvest, SSGA).

• Scarcity-Driven Supply Dynamics

  Bitcoin’s programmatic scarcity, reinforced by the recent halving event, inherently limits new supply. This fixed supply mechanism, contrasting with expanding fiat currencies, strengthens its appeal as a hedge against inflation and a superior store of value in an uncertain macro environment. Demand pressure from institutional inflows against constrained supply creates a powerful upward pricing dynamic.

• Maturing Digital Gold Narrative

  Bitcoin continues to solidify its position as “digital gold,” offering a decentralized, censorship-resistant alternative to traditional safe-haven assets. Its non-sovereign nature and robust network security are increasingly valued amid geopolitical instability and concerns over central bank monetary policies. This narrative positions Bitcoin as a core component of diversified portfolios seeking long-term value preservation.

• Expanding Network Utility & Accessibility

  Beyond its store-of-value function, Bitcoin’s underlying network continues to evolve (e.g., Lightning Network for faster payments, Ordinals for new use cases). Coupled with growing global awareness and easier on/off-ramps for both retail and institutional investors, its utility and adoption footprint are steadily expanding.

Investment Positives

We see several key drivers underpinning Bitcoin’s continued appreciation:

1. Institutional Capital Inflows: Spot Bitcoin ETFs are unlocking significant capital from traditional finance, establishing a new baseline of demand. These instruments provide regulated, secure, and liquid access, overcoming prior barriers for large allocators.
2. Post-Halving Supply Shock: The recent halving (April 2024) cut the new Bitcoin supply issued to miners by 50%. Historically, halving events precede significant price appreciation due to this immediate reduction in supply against growing demand.
3. Macroeconomic Tailwinds: Persistent inflation concerns, declining real interest rates, and geopolitical tensions enhance Bitcoin’s appeal as a hard asset and hedge against currency debasement.
4. Global Regulatory Clarity (Evolving): While uneven, increasing regulatory frameworks (e.g., MiCA in Europe, ETF approvals in the US) provide greater certainty for investors and foster further mainstream adoption.
5. Network Security & Decentralization: Bitcoin’s robust proof-of-work mechanism and unparalleled decentralization make it the most secure and resilient blockchain network, a critical factor for long-term value storage.

Competitive / Peer Analysis

Bitcoin vs. Gold

• Similarities:
  • Store of Value: Both are widely considered hedges against inflation and economic uncertainty.
  • Scarcity: Both have limited supply; Bitcoin’s supply is mathematically fixed at 21 million, while gold’s supply is finite but its exact quantity is unknown and subject to new discoveries.
  • Non-Sovereign: Independent of government and central bank control.
• Differences:
  • Physical vs. Digital: Gold is tangible; Bitcoin is a digital asset.
  • Portability & Divisibility: Bitcoin is highly portable, easily transferable globally, and infinitely divisible (to 8 decimal places). Gold is cumbersome to transport and less divisible.
  • Transaction Costs & Speed: Bitcoin transactions can be faster and cheaper than physical gold transfers, especially across borders.
  • Verifiability: Bitcoin’s authenticity is cryptographically verifiable; gold requires assaying.
  • Volatilty: Bitcoin generally exhibits higher price volatility than gold.
• GS Research View: Bitcoin is emerging as a “digital gold 2.0,” offering superior characteristics in a digital age, though gold retains its role due to long history and industrial uses. We view them as complementary rather than mutually exclusive.

Bitcoin vs. Ethereum

• Similarities:
  • Leading Cryptocurrencies: Both are dominant forces in the crypto ecosystem by market capitalization.
  • Decentralized Networks: Both operate on decentralized blockchain technologies.
  • Network Effects: Both benefit from significant developer communities, user bases, and infrastructure.
• Differences:
  • Primary Purpose: Bitcoin is primarily a decentralized store of value and peer-to-peer electronic cash. Ethereum is a smart contract platform designed for decentralized applications (dApps), NFTs, and DeFi.
  • Monetary Policy: Bitcoin has a fixed supply cap (21 million). Ethereum’s supply is not fixed but has a deflationary mechanism post-Merge (ETH burn from transaction fees).
  • Consensus Mechanism: Bitcoin uses Proof-of-Work (PoW). Ethereum transitioned to Proof-of-Stake (PoS).
  • Technical Roadmap: Bitcoin focuses on stability and security of its base layer; Ethereum is highly innovative, with ongoing upgrades to improve scalability and efficiency.
• GS Research View: Bitcoin and Ethereum serve distinct but complementary roles within the digital asset space. Bitcoin as the “digital reserve asset” and Ethereum as the “programmable internet.”

Estimates & Operating Assumptions (3-Year Forward Look)

Our projections reflect continued institutional adoption, network growth, and the impact of Bitcoin’s scarcity model.

Source: CoinGecko, Analyst Estimates (2024E-2026E based on GS Research)

Operating Assumptions:

• Supply: Circulating supply assumes minimal increase year-over-year (~20M BTC) due to the halving, prior to the next halving in 2028.
• Demand: Driven by sustained institutional adoption, particularly from wealth managers and pension funds, coupled with steady retail accumulation.
• Network Security: Hash rate growth reflects continued miner investment and network robustness.
• Volume Proxy: “Daily Transaction Volume” uses the CoinGecko 24h trading volume as a proxy for overall economic activity related to BTC, acknowledging this differs from on-chain transaction volume.

Valuation

We approach Bitcoin’s valuation through a combination of scarcity models and network-based metrics, given its unique characteristics as both a digital asset and a technology network.

1. NVT Ratio (Network Value to Transactions Ratio)

The NVT ratio, conceptually similar to a P/E ratio, compares Bitcoin’s market capitalization (Network Value) to its daily transaction volume. A higher NVT can indicate that the network’s valuation is growing faster than its utility/usage, while a lower NVT might suggest undervaluation.

• Current Market Cap: €1,589.4 Bn
• Current 24h Volume (proxy for economic activity): €32.1 Bn
• Calculated NVT Ratio (Current): €1,589.4 Bn / €32.1 Bn = 49.5x
• 12m Forecast Market Cap: €2,050 Bn (based on €102,500 price target and ~20M circulating supply)
• 12m Forecast Daily Volume (proxy): €40 Bn
• Calculated NVT Ratio (12m Forecast): €2,050 Bn / €40 Bn = 51.25x

GS Research View: The projected slight increase in the NVT ratio suggests that while Bitcoin’s valuation is expected to grow, it is supported by a growing economic activity and institutional interest. A ratio around 50x indicates a healthy valuation, reflecting robust underlying demand relative to transaction throughput.

2. Stock-to-Flow (S2F) Model

The Stock-to-Flow model assesses Bitcoin’s value based on its scarcity, comparing the existing supply (stock) to the annual rate of new supply (flow). It highlights the impact of halving events on scarcity.

• Circulating Supply: ~19,984,818 BTC (based on current market cap / current price)
• Annual New Supply (Post-Halving): (3.125 BTC/block * 144 blocks/day * 365 days/year) = 164,250 BTC
• Calculated S2F Ratio: 19,984,818 BTC / 164,250 BTC = 121.7x

GS Research View: A high S2F ratio underscores Bitcoin’s extreme scarcity, especially post-halving. While not a precise price prediction tool, the model reinforces the fundamental supply constraint that is a core pillar of Bitcoin’s value proposition, particularly as demand accelerates.

3. Network Effects

Bitcoin’s value is further enhanced by its robust network effects, akin to Metcalfe’s Law. As more users, developers, miners, and institutions join the network, its security, utility, and overall value increase exponentially. The growing hash rate (processing power), expanding active address count, and increasing global node distribution all contribute to a stronger and more valuable network.

GS Research View: The increasing integration into traditional finance is a significant network accelerator, bringing in more participants and capital, thereby strengthening the network’s long-term viability and intrinsic value.

Key Risks

Investing in Bitcoin involves substantial risks, including:

• Regulatory Headwinds: Unfavorable or restrictive regulations from governments globally could severely impact adoption, liquidity, and price. Potential bans or punitive taxation remain a threat.
• Price Volatility: Bitcoin is highly volatile. Significant price swings are common and can result in substantial losses for investors.
• Technological Risks: While robust, the underlying blockchain technology could face unforeseen vulnerabilities, bugs, or long-term threats (e.g., from quantum computing advancements).
• Competition: Increased competition from other cryptocurrencies, stablecoins, or future central bank digital currencies (CBDCs) could dilute Bitcoin’s market share or utility.
• Security Risks: Exchanges, wallets, and other infrastructure are susceptible to hacking, theft, or operational failures, leading to loss of assets.
• Macroeconomic Shifts: A significant global economic downturn or a sustained period of risk aversion could lead to a sell-off in risk assets, including Bitcoin.
• Concentration Risk: A significant portion of Bitcoin supply is held by a relatively small number of addresses (“whales”), whose large-scale selling could trigger sharp price declines.

Appendix

Disclaimer

This report is for informational purposes only and is not an offer or solicitation to buy or sell any security. All opinions expressed herein are subject to change without notice. Investing in digital assets is highly speculative and involves a significant risk of loss.

AI-Generated Content Disclosure

This report has been generated using Artificial Intelligence models based on provided market data and news. While efforts have been made to ensure accuracy and analytical rigor, it should be used for informational purposes only and does not constitute financial advice. Investors should conduct their own due diligence and consult with a qualified financial advisor before making any investment decisions.

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