Repricing the Economy in Bitcoin
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Below is a structured summary of the document “Repricing the Economy in Bitcoin”.
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Overview and Purpose
The document argues that the conventional way investors think about value is fundamentally flawed because it relies on fiat currencies, particularly the US dollar, as the unit of account. Since fiat money steadily loses purchasing power due to monetary expansion, measuring returns in dollars obscures true economic performance.
Instead of asking “What is bitcoin worth in dollars?”, the authors propose reversing the question: “What are all other assets worth in bitcoin?”
Bitcoin, with its fixed supply and superior monetary properties, is presented not merely as an asset, but as a more reliable measuring stick for long-term value. The paper develops this idea by applying a bitcoin-denominated discounted cash flow (DCF) model, using Apple (AAPL) as a detailed case study .
Core Critique of Fiat-Based Valuation
The Dollar as a Weak Unit of Account
The paper explains that the US dollar is not just physical cash but a vast system of IOUs—bank deposits, credit, bonds, and liabilities. While consumer price inflation averages about 2% annually, the M2 money supply has historically grown closer to 8% per year, meaning dilution of dollar value is much faster than CPI suggests.
This excess liquidity tends to inflate asset prices rather than consumer goods:
- S&P 500 ≈ 8–9% nominal CAGR
- Real estate ≈ 5% nominal CAGR
- Fine art ≈ 10% nominal CAGR
However, once returns are adjusted for money supply growth:
- S&P 500 real returns shrink to ~1.3%
- Housing turns negative in real monetary terms
The implication is stark: much of what appears as “investment performance” is actually monetary debasement .
Bitcoin as Superior Money
Bitcoin is introduced as a monetary system with properties that fiat lacks:
- Fixed supply (21 million)
- High portability and divisibility
- Strong durability and scarcity
- Global, permissionless accessibility
Because it does not inflate, bitcoin provides a hard denominator against which economic activity can be more honestly measured. If money itself appreciates over time, then assets that merely keep up with inflation will look increasingly unattractive when priced in bitcoin terms .
Valuing Assets: USD DCF vs. BTC DCF
Traditional USD-Based DCF (Apple Example)
Using standard corporate finance assumptions:
- Risk-free rate: ~3.9% (10-year Treasury)
- Equity risk premium: 5%
- Cost of equity: ~8.9%
- WACC: ~8.7%
- Exit P/E multiple: 20
Under this model:
- Apple appears undervalued
- Implied stock price ≈ $371 vs. ~$230 current
- Implied upside ≈ +61%
- Market cap should be ~$5.6T instead of ~$3.5T
This is the familiar conclusion investors reach when measuring value in depreciating dollars .
The Bitcoin-Based Valuation Framework
Key Conceptual Shift
When bitcoin is the base money, the opportunity cost of investing changes:
- The benchmark is no longer Treasury bonds
- It is bitcoin’s expected return
In fiat terms:
1 | USD discount rate = risk-free rate + equity risk premium |
In bitcoin terms:
1 | BTC discount rate = bitcoin expected return – equity stability premium |
Equity Stability Premium
This is a new concept introduced by the paper. Since equities are:
- More volatile than dollars
- But less volatile than bitcoin
Investors may accept lower returns from equities as compensation for their greater short-term stability relative to bitcoin.
The size of this premium depends entirely on how much volatility an investor is willing to tolerate.
“Choose Your Own Adventure” Models
The paper presents three BTC-denominated Apple valuations, all assuming a 29% expected annual bitcoin return, but varying the equity stability premium.
1. Base Case (10% Stability Premium)
- BTC discount rate: 19%
- Exit P/E: 15
- Apple appears overvalued
- Implied Apple price ≈ $143
- Required decline: –38%
Despite Apple’s strong business fundamentals, bitcoin appreciates faster than Apple’s cash flows, causing earnings measured in satoshis to decline over time .
2. Conservative Case (20% Stability Premium)
- BTC discount rate: 9% (similar to USD model)
- Apple appears undervalued
- Required upside: +31%
This reflects a more volatility-averse investor who heavily penalizes bitcoin’s price swings. Even here, Apple’s valuation is lower than in the USD-based framework, showing how sensitive outcomes are to monetary assumptions .
3. Bull Case (0% Stability Premium)
- BTC discount rate: 29%
- No reward given to equities for stability
- Apple appears massively overvalued
- Required decline: –65%
This represents a fully committed bitcoin holder who views bitcoin volatility as irrelevant over the long term. Under this lens, nearly all equities appear dramatically overpriced .
Broader Implications
A New Economic Lens
The authors argue that bitcoin is not just an asset but a new measuring framework for reality. As bitcoin adoption increases:
- Traditional asset valuations may compress
- Corporate equity premiums may shrink
- Holding productive assets becomes less attractive relative to holding sound money
Corporate Strategy
The paper highlights companies like MicroStrategy (MSTR) as pioneers:
- Using equity issuance and convertible debt
- To convert overvalued shares into undervalued bitcoin
Companies that fail to adopt bitcoin-based treasury strategies may underperform those that do.
Final Conclusion
The central thesis is philosophical as much as financial:
- Money that gains value changes everything
- When the denominator appreciates, numerators shrink
- Assets that looked “cheap” in fiat may be expensive in bitcoin
The paper does not claim to define the correct bitcoin discount rate or equity stability premium. Instead, it provides a framework that forces investors to confront their assumptions about money, risk, volatility, and time.
Ultimately, the authors argue that:
Bitcoin is the most honest unit of account humanity has ever had, and repricing the economy in bitcoin reveals how inflated much of today’s financial world truly is .
If you’d like, I can also:
- Condense this into an executive brief
- Translate it into French
- Critically evaluate the assumptions (especially BTC CAGR)
- Apply the same BTC-DCF logic to another asset (real estate, bonds, another company)