What is the Golden State Price Per Bitcoin?
$2,500,000 Per Bitcoin.
Here’s Why.
Historically, the 10-year treasury rate has had a medium yield of 3.81% (vs. 4.17% today), roughly half of the medium yield of the S&P 500, which has been 6.67% medium (vs. only 3.67% today). From this historical perspective, stocks have typically enjoyed nearly 2x higher yields than bonds, since equities offer greater return for the greater risk.
But today, the 10 YTR is 4.17%, which is actually higher than the yield on the S&P 500, which is only 3.67%.
Of course, who wants to own bonds in an inflationary environment (getting 4.17% when their principal is losing its value due to actual inflation being 7.2%?) But also, who wants to put their money at risk with equities for only a 3.67% yield?
There’s simply too much money that has been created in the past 3 years. And people wonder why the prices of homes, rent, utilities, food, etc. have more than doubled in most categories and geographies in the U.S.
To grasp the scale of the Fed's monetary expansion, we must rewind 22 months. In early 2020, the amount in circulation stood at $4.0192 trillion. By January 4, 2021, it surged to $6.7 trillion. Subsequently, the Fed accelerated its efforts, and by October 2021, the figure had soared to $20.0831 trillion circulating dollars.
When the Fed doubles the money supply, it distorts values and risk-reward models, and forces savers to become investors in things they wouldn’t normally invest in (would you invest in a company if you knew the yield on it would only be 3.67% as it is today for the average S&P 500 stock?)
Bitcoin offers society - even those not investing in it directly, a stable, decentralized, and unalterable monetary system and store of value that solves many of the challenges of inflation and crony-capitalism that have been part of our society since the creation of the Federal Reserve in 1913. Bitcoin provides us citizens a bucket to absorb the inflation created by the Fed, to bring prices back into what I call a “golden state” of equilibrium and fair value.
If/when the yields return to historic norms, it will be largely due to Bitcoin’s role in imposing discipline upon central bankers as it relates to inflation.
Currently, the S&P 500 has a market capitalization of $41.568 trillion dollars, as so much of the liquidity in the market hasn’t found a safe and profitable home to live in, it resorts to what it knows: the stock market, or real estate, or bonds, etc. The yield of 3.67% produces only $1.525 trillion in earnings.
Assuming those earnings held constant ($1.525 T) on a historic average yield of 6.67%, the S&P would instead have a market capitalization of $22.871 T, or about half of what it’s currently priced at. Most investors, historically speaking, would want to get at least 6% yield on their equities.
Bitcoin helps facilitate this as a means of absorbing excess liquidity by becoming a more stable store of value, until such opportunities arise where an investment (that is, an actual return of significant return on one’s investment) is warranted.
To the extent Bitcoin continues to do its job and function as a greater store of value, it can function as “rat poison” for the banking cartel and absorb the excess liquidity in the market ($41.568 T vs. $22.871) which comes to an estimated excess liquidity of $18.696 T if we’re looking at just the S&P 500 and not other asset classes such as bonds, real estate, gold, etc.
Assuming this excess of $18.696 T finds its way into the only rational place where a store of value can be found (Bitcoin), in today’s dollars, we’d see each Bitcoin being worth $890,285 ($18.696 T / 21 M Bitcoins).
Of course, that assumes it all happens at once, and that the excess “irrational liquidity” is absorbed proportionally into these 21 M Bitcoins. But of course we know most people who buy bitcoin never sell, and that there’s only so much of it left.
The reality is that 95% of the supply of bitcoin will already have been mined by 2026 and what’s left on exchanges, net of new mining and those being gobbled up by the new government-approved ETFs, and considering that 70% of bitcoin doesn’t sell (hodl rate) means that this $18.696 T of excess liquidity will have to flow into what’s left of the limited Bitcoin supply: which is only about $1.3M bitcoin left to be mined, and approximately 30% of the current bitcoin supply available for trade as is typical in a given year (5.91M coins), netting a possible 7.21 bitcoins at the high end that might be available to trade, given the historic psychographics of bitcoin holders vs. traders.
That leaves us with a “golden state” price per Bitcoin estimate of $2,595,833 per coin, assuming no additional inflation (which won’t happen of course).
Of course, the price of bitcoin will continue to increase relative to broken fiat currencies even after it hits $2.5M+ per coin.
But only until the price of Bitcoin reaches its golden state of ~$2.5M per coin in today’s market environment would it make rational sense to invest it in other places, like a saturated, overpriced stock market given today’s excess liquidity allocated towards the S&P at today’s prices.
