Monero Valuation Musings

EDIT: I neglected a critical aspect of this analysis by not paying proper attention to the concept of stock-vs-flow. I am especially grateful to the r/monero subscriber who very kindly and extremely quickly corrected me on these points. 

The net result, as it turns out, is still not too dissimilar from the results below... especially when variability of assumptions is high. I recommend you check out his response on the sub. 

I'll try leaving this article here (as a monument/remind to me of my error) but wrap it with the conclusion of, as he put it- 'broad acceptance in the global black market = moon for monero/privacy coins no matter how calculated.' 

note to self: entitling something 'musings' doesn't mean you can't scrub it better than you did here.

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In the course of responding to a comment posted on my blog yesterday (response in the comments section to ‘Sport Coach’, on this article)  I dug up some interesting information around the size of black-market economies  - which got me to thinking about the prospects for privacy coins more broadly and the numbers associated with them.

In crypto-land broadly, there is currently a huge amount of uncertainty as to which coins will be the ‘winners’ – that is, which will have enduring and significant presence. The action today is Bitcoin versus Bitcoin Cash and Bitcoin Gold... with no small amount of suspected price manipulation all around I might add.

In any case, while I remain optimistic that the broader public will eventually come around to Monero (appreciating it for its moneyness characteristics) I recognize that there are many who feel it will always be a ‘dark coin’ – catering to the black-market, whether than be un-official, non-reporting, or otherwise illegal aspects of economies.

I won’t even bother here with trying to untangle the morass that equates behavior outside the purview of government with things that are ‘bad’ (though I will give the link to this strip which I think is terrific). However, even if we go down the path of assuming that Monero does have future only as a ‘dark coin’, the metrics are quite interesting.

While measures of black-market activity are notoriously unreliable, it is generally accepted that most developed countries have a black-market economy each year ranging in size from 15-30% of GDP. For less developed countries, the estimates go up from there. Given this, if we ascribe a flat 15% of global GDP to ‘black market’ activities, we are probably being conservative. Let’s do it anyway, and further extrapolate that 15% of GDP activity is supported by an equivalent supporting money supply contribution – so 15% of global M3 is held/used in ‘the black market’

Now, let’s make a few further assumptions and see where it leads:

In the next 5 years, 80% of global money will be digital.
This isn’t hard to accept for most people. If it were up to some people who want to ‘ban cash’, the number would be 100% and time horizon would be a lot sooner. Nevertheless, let’s stick with these numbers as hopefully accepted as reasonable.

In this time period, the percentage of all human economic activity considered ‘illicit’ will not dip lower than globally 15% of all transactions.
Considering that regulation and control seems to be increasing at a rapid clip, making more and more otherwise innocuous activities illegal (unless proper permitting, taxes, reporting, etc. are achieved) – this is probably also reasonable if not a bit conservative.

Global M3 stays constant at about $80 trillion equivalent.
We could argue it should be either higher or lower, but let’s assume it stays flat for simplicity. It shouldn’t materially change our calculus.
The best privacy coin will garner no less than 50% of the relevant digital market.
Admittedly, this is a bit of a loaded statement. How we you define ‘best’ is critical. Let’s for now assume it’s a generally favourable combination of ubiquity and true fungibility/anonymity.

Given these assumptions now, let’s do some math:

$80 trillion global M3
X
80% Digital money
X
15% ‘black market’
X
50% penetration of leading privacy coin
= $4.8 Trillion.

If we assume for the sake of argument that this ‘best privacy coin’ is Monero, then we may arrive at a per-coin value of $240,000 – or roughly 600x the current price. Not a bad return I think, particularly as it is arguably lower risk than many other coins with a ‘grand vision’… this analysis is not dependent on jockeying for best position with government acceptance, smart-contract supremacy, or some other functional utility which may be either deprecated or usurped. It is instead dependent upon a facet of human society remaining present which has done so for thousands of years – an unofficial, ‘black market’ economy.

If the broader public does ‘catch on’ to the inherent weaknesses of other coins lacking privacy/fungibility, then the returns could of course be more favorable – but in terms of sleeping at night, I’d venture to say that it’s generally a safe bet to assume that there will always be demand for ‘black market’ items. As such, even looking at Monero from the (in my mind unlikely) prospect of never growing past a libertarian V-for-Vendetta oasis, it presents quite an interesting value proposition.

Perhaps I’m seeing Monero through rose-colored glasses - that’s certainly a possibility. If I am, I humbly ask the reader to share any critique/criticism - but as far as ‘big picture, back of the envelope’ analyses go, I don’t think this one is bad.

Finally, just one more note on investment analyses and simplicity. Back ‘in the day’ when I was first professional tasked with developing traditional investment theses, I thought that a ‘good’ analysis would have at least 10 pages of historical and projected financials – not to mention all manner of detail and usually full financial statement model flowthrough. I was a bit taken aback when a very successful professional investor friend shared one of his models. It was in excel, but fit on one page. One page. And guess what – that particular thesis/trade? Worked out like a charm.

Don’t confuse length of analysis with quality. Some of the most useless investment reports I’ve ever had distributed to me (and which I’m sure no one ever really read) were also the longest and seemingly most ‘professional’ reports.  Again, in ‘the old days’, there was a wall-street maxim that if you couldn’t fit your investment thesis on the one-page space that the old Bloomberg terminal provided as an email/distribution mechanism, you were widely considered to be 'doing it wrong'.

Cheers,
Izzy


Finally, the most appreciated form of support is an email or message of thanks/encouragment.... but as a few people have asked me to include it, a monero address that may receive donations if you feel so inclined is :
41fksK8rNJ7VUWHr5yW58C75oAJbL8mEh3ytfLDucVq3StwTudzbGPyQ75Sj3BeqvNjKtw3Mn5Gni5nD62aWZCiDNjaPY8k

 thanks for reading!


Comments

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  2. HI. I'M STUART NEWBY EX KLEINWORT BENSON LONDON. THEN MONTANI MONACO. I'M AN EX BIG MAFIA MONEY LAUNDERER ( I DID THAT IN LONDON, IN SINGAPORE AND LATELY HERE IN MONACO THRU MY EX EXTREMELY CRIMINAL COMPANY CALLED MONTANI )! I HAVE BEEN WASHING LOT OF MAFIA ASSASSIN CASH WITH THIS PEDOPHILE FREEMASON FELON, MALAVITOSO HOODED BROTHER OF MINE CALLED PAOLO BARRAI. BORN IN MILAN ON 28.6.65. BOUT WHO I WANT TO TELL A LOT, NOW. I WANT TO MAKE BIG REPENTANT MAFIOSO'S CONFESSIONS BOUT ALL THIS AND RIGHT NOW!!!!!!!!!!!!!!!!!!!!!!!!
    1
    IS A PEDOPHILE SODOMIZING CHILDREN: PAOLO PIETRO BARRAI (BITCOIN: THAT "IT" USES X MAFIA-MONEY-LAUNDERING THRU VERY CRIMINAL EIDOO, VERY CRIMINAL CRYPTOLAB S A, VERY CRIMINAL CRYPTOPOLIS, VERY CRIMINAL MEDICALCHAIN, VERY CRIMINAL BITMAX, VERY CRIMINAL WMO GROUP)! EXTREMELY DANGEROUS PEDERAST PAOLO PIETRO BARRAI WELL KNOWN ALL AROUND THE WORLD AS " THE PEDOPHILE OF BITCOIN"! MAFIA MONEY LAUNDERER PAOLO BARRAI BORN IN MILAN ON 28.6.65 USES BITCOIN TO ORGANIZE THE RAPING OF CHILDREN AND TO PROMOTE PORNOGRAPHY FOR PEDOPHILES LIKE HIM! WE GOT LOT OF PROOVES BOUT IT!!! YES, IS HOMOSEXUAL OF PEDOPHILE KIND PAOLO BARRAI: BLOG "MERDATO" LIBERO ALIAS "STALKING SHIT SPREADED IN A FREE WAY WITH NAZIST JOSEPH GOEBBELS'S STYLE". STALKING SHIT BASED ON IMMENSE FAKE IN ORDER TO KILL EVERYONE IS NOT HITLERIAN & ANTI SEMITIC LIKE HIM! PAOLO BARRAI IS A BASTARD ASSASSIN, PAOLO BARRAI IS A PRINCIPAL OF MANY MURDERS! PAOLO BARRAI HAS ALREADY GONE 3 TIMES TO JAIL! PAOLO BARRAI HAS BEEN FIRED BADLY BY CITIBANK MILAN! PAOLO BARRAI HAS BEEN VERY HEAVILY FINED BY CONSOB! PAOLO BARRAI HAS ESCAPED FROM BRASIL AT NIGHT, GETTING A FIRST AVAILABLE FLIGHT, IN THE MIDDLE OF CARNAVAL DAYS, TO NOT FINISH IN JAIL: FOR EXTREMELY SERIOUS CRIMES LIKE HAVING RAPED AN 8 YEARS OLD CHILD, AS WELL AS FOR ENORMOUS FRAUDS, MAFIA MONEY LAUNDERING, NAZIST AND RACIST PROPAGANDA, EXECUTION OF KILLING THREATS, BLACKMAILS AND EXTORSIONS.... AND, LITTLE SWEET CHERRY ON CAKE: PEDERAST SEX HE HAD WITH AND 8 YEARS OLD CHILD.
    BASTARD ASSASSIN WORM PAOLO BARRAI IS ALSO A MEGA SCAMMER, BURNING ALL SAVINGS OF EVERYONE FALLING IN HIS -CYBER-MEDIATIC-FINANCIAL TRAPS! AL CAPONE OF FINANCE: PAOLO BARRAI BORN IN MILAN ON 28.6.1965 ( LAUNDERING CASH FROM COSA NOSTRA, CAMORRA, NDRANGHETA, AS WELL AS CRIMINAL CASH FROM NAZIRACIST MOVEMENTS LEGA NORD AND FORZA ITALIA, IN EXTREMELY CRIMINAL EIDOO SWITZERLAND AND EXTREMELY CRIMINAL CRYPTOPOLIS SWITZERLAND)!!!
    AND.. AGAIN.. AND..AGAIN..AND..AGAIN...
    IS ONE OF MOST BASTARD CRIMINAL CONNECTED TO PANAMA PAPERS, STINKY WORM PAOLO BARRAI, ALREADY THREE TIMES IN JAIL, BORN IN MILAN ON 28.6.1965
    YES, I AM WRITING BOUT CRIMINAL ASSASSIN PEDOPHILE PAOLO BARRAI FROM MEDICALCHAIN, CRIMINAL ASSASSIN PEDOPHILE PAOLO BARRAI FROM CRYPTOLAB S A,
    CRIMINAL ASSASSIN PEDOPHILE PAOLO BARRAI FROM CRYPTOPOLIS, CRIMINAL ASSASSIN PEDOPHILE PAOLO BARRAI FROM BITMAX, CRIMINAL ASSASSIN PEDOPHILE PAOLO BARRAI FROM VERY FAILING ICO EIDOO, ICO MEGA MAFIA MONEY LAUNDERER FOR NDRANGHETA, VIA STINKY DELINQUENT NETALE FERRARA FROM REGGIO CALABRIA.
    CAREFUL TO THIS LOUSY VERY NASTY, SAVAGE DELINQUENT: PAOLO PIETRO BARRAI EX CITIBANK MILAN, BORN IN MILAN ON 28.06.1965, CONDEMEND TO JAIL ALREADY MANY TIMES!
    ONE OF DIRTIEST MAFIA AND CRIMINAL COLLARS MONEY LAUNDERER IN PANAMA ( AND NOT ONLY IN PANAMA)... EXTREMELY DELINQUENT INDIVIDUAL, ALREADY THREE TIMES IN PRISON ( EITHER IN ITALY AND ESPECIALLY IN BRAZIL), STINKY FELONIOUS PAOLO BARRAI (OR STINKY FELONIOUS PAOLO "PIETRO" BARRAI), BORN IN MILAN ON 28.06.1965.
    FROM VERY VERY CRIMINAL WMO SA PANAMA, VERY VERY CRIMINAL WORLD MAN OPPORTUINITES VIA MAZZINI 14 LUGANO, VERY VERY CRIMINAL BSI ITALIA SRL VIA SOCRATE 26 MILAN, VERY VERY CRIMINAL BLOG MERCATO LIBERO ( NOT FOR NOTHING, EVERYONE IN ITALY AND INITALIAN SPEAKING PART OF SWITZERLAND, KNOWING HOW MANY CRIMES AND WHAT HORRIBLE KIND OF CRIMES, PAOLO BARRAI, ALWAYS DOES, CALLS THIS BLOG: "MERDATO" LIBERO).

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  3. 2
    FINED VERY HEAVILY BY CONSOB FOR MEGA FRAUDS HE DID ON PV BUSINESS AND NOT ONLY
    http://www.bluerating.com/trading/179-promotori/28601-qmultaq-da-70mila-euro-per-un-ex-promotore-che-ha-violato-gli-obblighi-informativi.html
    https://www.adviseonly.com/blog/investire/mercati-finanziari/il-trading-dei-miracoli/
    http://www.advisoronline.it/albo/consob/22190-consob-sanziona-a-raffica.action
    FIRED BADLY BY CITIBANK MILAN FOR MEGA ROBERRIES, COLLECTION OF BRIBES AND FRAUDS "IT" USED TO ORGAINZE THERE. MADE CONDEMNED TO JAIL BY CITIBANK MILAN.
    CONDEMNED TO JAIL, THEN, EVEN IN BRAZIL, FOR OTHER FRAUDS, FOR MAFIA MONEY LAUNDERING, FOR ATTEMPTED EXTORTION, FOR DEATH THREATS DONE, FOR BLACKMAILS DONE, FOR INTERNET STALKING DONE AND ALSO ATTEMPTS OF HAVING PEDOPHILE SEX WITH VIEW UNDERAGE LOCAL BOYS ( INFACT, SINCE ALL THIS GOT SENTENCED, EXTREMELY CRIMINAL PAOLO BARRAI HAS NEVER PUT A FEET IN BRAZIL ANYMORE... HERE FOLLOWS A LINK CORRESPONDING TO THE BEGINNING OF ANY INVESTIGATION
    http://www.rotadosertao.com/noticia/10516-porto-seguro-policia-investiga-blogueiro-italiano-suspeito-de-estelionato )
    "IT" TOTALLY BURNED, TOTALLY NULLIFY 100% OF THE SAVINGS SOME CANDID PEOPLE HE SCRUBBED VIA INTERNET, GAVE HIM TO INVEST ( EVEN BECAUSE IN HAVING "NOSE FOR BUSINESS", IN HAVING "BUSINESS INTUITION", PAOLO BARRAI IS AN ABSOLUTE DONKEY: HIS PREVISIONS IN WORLDWIDE STOCKS, COMODITIES, CURRENCIES, REAL ESTATES, ARE ALWAYS WRONG, WRONG, INCREDIBLY WRONG... ALWAYS.... WITH ZERO EXCEPTIONS...EVERY ONE IN FINANCIAL BUSINESS CALLS HIM "REVERSAL INDICATOR"). "IT" HAS BEEN WASHING IN PANAMA ( IN CONNECTION WITH MOSSACK FONSECA AND NOT ONLY), SWITZERLAND ( BY FINTER BANK ZURICH LUGANO AND BANCA STATO LUGANO), GERMANY, SPAIN, ESTONIA AND DUBAI, LOT AND LOT OF
    -ASSASSIN ITALIAN COSA NOSTRA, NDRANGHETA, CAMORRA'S CASH
    -ASSASSIN COLOMBIAN MAFIA CASH
    -ASSASSIN MEXICAN MAFIA CASH
    -NAZIRACIST LEGA NORD'S CASH ( COMING FROM MEGA CORRUPTION, MEGA ROBBERIES, DIRTY BUSINESSES OF THESE KUKLUKKLANIST MIXED TO NDRANGHETIST FROM LEGA NORD, IN CONNECTION WITH DICTATORS LIKE PUTIN, GHEDDAFI AND LE PEN'S FAMILY)
    HE CALLED MANY TIMES OBAMA BARACK A BLACK BASTARD
    http://ilpunto-borsainvestimenti.blogspot.com/2013/01/ecco-limpatto-fiscale-che-ha-fatto.html
    AN HISTERICAL FAIRY
    http://ilpunto-borsainvestimenti.blogspot.com/2014/03/mercato-libero-e-per-la-grande-madre.html
    ( "IT" CALLS OTHER PEOPLE "FAIRY" BUT THEN ALWAYS LOOKS FOR 8, 10, 12, 14 YEARS OLD GYPSY MALE PROSTITUTES TO MAKE PAEDERAST SEX WITH)
    - FASCIST MAFIOSO DICTATOR, PRINCIPAL OF MANY MURDERS AND SLAUGHTERS, AS MUCH AS ASCERTAINED PEDOPHILE SILVIO BERLUSCONI'S CASH
    http://www.mercatolibero.info/panama-mercato-libero/
    INFACT, SILVIO BERLUSCONI, LEGA NORD, COSA NOSTRA, CAMORRA, NDRANGHETA, COLOMBIAN MAFIA, MEXICAN MAFIA, ARE, SINCE ALWAYS, SAME KILLING CHOLERIC SEWER!
    PS
    BE STRONG NOW PLS. AS JUST MENTIONED BEFORE, BUT BETTER EXPLAINED NOW, EXTREMELY CRIMINAL PAOLO BARRAI BORN IN MILAN ON 28.6.1965, HAS THE CARD OF WORLDWIDE ASSOCIATION OF PEDOPHILES: " PEDOPHILE PRIDE".
    "IT" SAID MANY TIMES, IN PRIVATE, "IT" HAS BECOME, SINCE VIEW YEARS, AN HOMOSEXUAL PEDOPHILE. A PAEDERAST. AND "IT" IS PROUD TO MAKE SEX WITH BOYS JUST A LITTLE BIT MORE THAN CHILDREN, BEING KIDS 8, 10, 12, 14 YEARS OLD. "IT" SAID THIS HAPPENS EVERY TIME "IT" GOES TO PANAMA, LATIN AMERICA IN GENERAL AND THAILAND ( AND OUT OF PANAMA PAPERS ARE COMING OUT VARIOUS CASES OF PEDOPHILES AND MAFIOSI HAVING EXTREMELY DIRTY CASH THERE: ONE OF THEIR MAIN CRIMINAL BANKING INTERMEDIARIES WAS THIS "SURPLUS OF PRISON" WHO IS PAOLO BARRAI )!

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