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.


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
80% Digital money
15% ‘black market’
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'.


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 :

 thanks for reading!


  1. Hey Izzy, big fan of your blog. Can you possibly expand more on the 5 year, 80% penetration by digital assets? This would an incredible change to witness by 2023. Are you saying instead of the USD/EURO/YEN, 80% of transactions would be in crypto? I was thinking this would happen more in 10 to 20 years.

    This would be quite a revolution that the entire world would have to undergo. I'm not so sure people are going to want to just "give up their bank accounts" and be there own bank. I'm sure older individuals will want to "stick my secure bank" than "manage some computer drives". And lets not forget over 90% of the world's wealth is in people 65 or older.

    1. hi there - thanks for the supportive words. I say 80% digital not meaning all crypto, but just that - digital. ie, electronic versus physical cash. The Masters Of Money have been quite intent (prior to the advent of crypto) on eradicating physical cash because a) it would give them astounding tracking and control features and b) it would allow them to do all sorts of absurd and destructive things like 'negative interest rates' (destructive to the rest of us). Of course the birth of blockchain has thrown a wrench in those works.

      i don't know what the penetration of blockchain will be as a percentage of crypto. if the masses of people are convinced that owning a centralized, digital form of money under full control of a governing 'authority' - whether that be fedcoin, yencoin, rublecoin, etc. is OK, then you don't really need the blockchain at all.. (at least not for money). but even in that world, whether crypto or not, the bulk will be in a form that is trackable at least and controllable at most. which is why i think monero or the 'winning' privacy coin(s) will have a major place.

      even 65+ technophobes don't sit on all their life savings under the mattress (well, some might.. but not most). they have their money in digital form already in the bank.

      in terms of 'being your own bank' - there will definitely be leaders and laggards.. but we're not talking about fancy methods of banking.. just a place to keep your dough. and sitting and earning 0.2% annually when reported inflation is more than 10x that (and real inflation is much higher) may be somewhat unpalatable to most as they realize it.

  2. What are your thoughts on Monero's blockchain bloat? Seems like that is a big scaling issue. Love to year your thoughts.


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