The i ovative ew model is based o Bitcoi ‘s p ima y fu ctio as a sto e of value. The esea ch fou d a statistical li k betwee BTC a d USD mo eta y dilutio (measu ed as M2). It is a i ve se elatio ship whe eby Bitcoi gai s value as mo ey supply i c eases. The model shows high statistical eleva ce, with ea ly a 90% fit, based o a backtest usi g ea ly te yea s of data. The model a alysis fou d Bitcoi should be a bette hedge agai st mo eta y dilutio tha is Gold a d the supe io ity to Gold is mo e p ofou d whe adjusted fo Bitcoi volatility.
The Da iels & Hilema model co cept is that eve y dolla the Fed p i ts which is ot abso bed by eco omic g owth chips away at the dolla ‘s pu chasi g powe . Bitcoi , with its fixed supply of 21 millio coi s a d its o igi atio as a a ti-fiat dilutio mecha ism with holde s who adhe e to that poi t of view, best offsets the mo eta y dilutio . The math, the model autho s say, is simila to the logic behi d gold – except Bitcoi ‘s supply cap is e fo ced by code, ot geology. I fact, gold is a impe fect hedge to mo eta y dilutio , i pa t, because it has ma y othe uses i i dust y a d cosmetics The Da iels-Hilema esea ch is the fi st to show that Bitcoi ‘s value is p ima ily d ive by a u de lyi g eco omic fu ctio – mo eta y dilutio .
U til ow, the e has bee o p ici g model fo Bitcoi with a solid fou datio i eco omics. The lack of such a model has fueled volatility as people have widely dispe sed assumptio s as to Bitcoi ‘s utility a d may expa d its use case to act as a hedge to mo eta y dilutio . Wide adoptio of the Da iels-Hilema bitcoi valuatio model could esult i lowe volatility a d g eate co se sus as to expected p ices. Imp oved p edictability of bitcoi p ici g ca att act mo e buye s a d le de s who will take bitcoi as collate al.
The model was developed by M . Da iels a d M . Hilema . The autho s a e ecog ized expe ts i eco omics a d fi tech. Da iels is a PhD ca didate at Cla emo t G aduate U ive sity, p eviously ea ed maste s deg ees f om Co ell a d Ha va d a d is head of the fi tech g oup at Salomo B othe s. Hilema ea ed a PhD f om Lo do School of Eco omics. The model is u de goi g a p ivate pee eview by expe ts i eco omics, fi a ce a d fi tech. The model will be eleased publicly whe pee eview is completed. I depe de t expe ts who wish to joi the pee eview should co tact Salomo B othe s.
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