Understanding Exchange Rates – What Is Bitcoin Actually Worth



Bitcoin is surging in value and popularity. Can we use #purchasingpower #parity, #interestrate parity, balance of payments and other #exchangerate determination #theories to derive a reasonable valuation for Bitcoin? Unfortunately, many of these theories require that there be an actual physical #country where #individuals live and transact. Interest rate parity is promising because you can earn a return on a bitcoin #savings #deposit. The high relative #interest rate suggests that bitcoin should be slowly losing value. There is perhaps an #arbitrage opportunity here. Given the #failure of these theories determine an appropriate exchange rate for Bitcoin, a #dividend discount model seems appropriate. Bitcoin has a negative #cashflow #problem because its costly use of #electricity and negative carbon footprint. If there is no way to derive a non-negative value from Bitcoin, shouldn’t it ultimately be worthless? #cfainstitute #caia #frm #marketcommentary

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Understanding Exchange Rates - What Is Bitcoin Actually Worth

Bitcoin is surging in value and popularity. Can we use #purchasingpower #parity, #interestrate parity, balance of payments and other #exchangerate determination #theories to derive a reasonable valuation for Bitcoin? Unfortunately, many of these theories require that there be an actual physical #country where #individuals live and transact. Interest rate parity is promising because you can earn a return on a bitcoin #savings #deposit. The high relative #interest rate suggests that bitcoin should be slowly losing value. There is perhaps an #arbitrage opportunity here. Given the #failure of these theories determine an appropriate exchange rate for Bitcoin, a #dividend discount model seems appropriate. Bitcoin has a negative #cashflow #problem because its costly use of #electricity and negative carbon footprint. If there is no way to derive a non-negative value from Bitcoin, shouldn't it ultimately be worthless? #cfainstitute #caia #frm #marketcommentary