Bitcoin (BTC) Analysis: A Sum-of-the-Parts Valuation

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1. Our Analytical Process: The SOTP Framework

To provide a robust and defensible valuation, we undertook a multi-step analytical process. The core challenge with valuing Bitcoin is that it is not a company that generates cash flows. Therefore, a standard Discounted Cash Flow (DCF) model is inappropriate. Instead, the SOTP method allows us to appraise each facet of Bitcoin's value proposition individually before aggregating them.

Our process involved:

1. Information Gathering: We initiated a comprehensive search, retrieving and filtering over 30 relevant articles, academic papers, and data sources published within the last three months to ensure our analysis is based on the most current information available as of August 2025. This included on-chain analytics, macroeconomic data, venture capital funding reports, and expert commentary.
2. Deconstruction: We identified the three primary narratives driving capital into the Bitcoin ecosystem. These "parts" – Store of Value, Medium of Exchange, and Technological Platform – serve as the segments for our valuation.
3. Valuation: We applied distinct and appropriate valuation methodologies to each part. This included Comparable Asset Analysis (CAA) for its "Digital Gold" function, a modified transactional value model for its payment network, and a venture-capital-based appraisal for its emerging technology stack.
4. Synthesis: We aggregated the valuations of each component to arrive at a total network value. By dividing this by the current circulating supply, we derived a fundamental price per BTC, which forms the basis of our investment thesis.

2. Deconstruction of Bitcoin's Value Proposition

To apply the SOTP framework, we first unbundle the Bitcoin network into its constituent parts.

• Part 1: The Store of Value (SoV) - "Digital Gold"
  This is currently the most powerful and widely accepted narrative for Bitcoin. It posits that Bitcoin's provable scarcity (a hard cap of 21 million coins), decentralization, and censorship resistance make it a superior long-term store of value compared to traditional assets like gold or fiat currencies, which are subject to debasement and geopolitical risks.
• Part 2: The Transactional Network - "Medium of Exchange (MoE)"
  This component values Bitcoin's function as a peer-to-peer electronic cash system. While the base layer is often criticized for its low throughput and high fees, the rapid growth of Layer 2 solutions, particularly the Lightning Network, is unlocking the potential for micropayments and scalable, near-instantaneous transactions, positioning it as a competitor to traditional payment rails.
• Part 3: The Technological Platform - "Decentralized Innovation Hub"
  This is the most nascent but potentially explosive component of Bitcoin's value. It represents the value of the Bitcoin blockchain as a foundational layer for new technologies. The emergence of protocols like Ordinals (enabling NFT-like assets on Bitcoin) and the proliferation of sidechains and Layer 2s are fostering a vibrant developer ecosystem, creating value independent of its monetary properties.

3. Valuation Analysis of the Parts

Part 1: Store of Value (SoV) Valuation

• Valuation Method: Comparable Asset Analysis (CAA)
  Here, we value Bitcoin relative to the established premier store of value: Gold. The thesis is that Bitcoin will, over time, capture a meaningful percentage of gold's market capitalization as investors diversify their non-sovereign wealth holdings.
• Calculation:
  1. Total Market Capitalization of Gold: According to market sources, the total market capitalization of gold as of August 2025 is approximately $16.5 trillion.
  2. Bitcoin's Current Share: Bitcoin's current market cap is roughly $2.35 trillion ($118,500 price * 19.8M coins), which represents about 14.2% of the gold market.
  3. Projected Capture Rate: We project that with increasing institutional adoption, regulatory clarity, and generational wealth transfer, Bitcoin can realistically capture 15% of the gold market cap as a baseline for its SoV value. More bullish scenarios could see this figure rise, but we will use a conservative figure for our base case.
• Valuation:
  • SoV Value = Total Gold Market Cap × Projected Capture Rate
  • SoV Value = $16.5 trillion × 15%
  • SoV Value = $2.475 trillion

This valuation is supported by continued inflows into Bitcoin ETFs and endorsements from major asset managers who now include Bitcoin as a small but permanent part of diversified portfolios.

Part 2: Transactional Network (MoE) Valuation

• Valuation Method: Transactional Value Model
  Valuing the MoE component is challenging. We will use a conservative approach by comparing the economic throughput of the Bitcoin network (including Layer 2s) to that of established payment processors and valuing it as a small but growing competitor.
• Calculation:
  1. Major Payment Network Value: The combined market capitalization of major payment networks like Visa, Mastercard, and PayPal is approximately $1.5 trillion in Q3 2025. These networks process trillions of dollars in volume annually.
  2. Bitcoin's Transactional Volume: On-chain data shows the Bitcoin network (base layer and Lightning combined) is settling an annualized volume of approximately $5 trillion. While much of this is large-value settlement (akin to Fedwire), the growth in Lightning transactions suggests a budding retail use case.
  3. Competitive Capture: We will value the MoE component by asserting it is worth a fraction of the incumbent payment networks' value. Given its current state—still nascent in retail but strong in settlement—we assign a value equivalent to 5% of the combined market cap of its centralized competitors.
• Valuation:
  • MoE Value = Combined Market Cap of Payment Networks × Competitive Capture Rate
  • MoE Value = $1.5 trillion × 5%
  • MoE Value = $75 billion

This is a highly conservative estimate. A significant breakthrough in the usability and adoption of the Lightning Network could lead to a dramatic re-rating of this component's value.

Part 3: Technological Platform Valuation

• Valuation Method: Venture Capital (VC) Benchmark Analysis
  This component's value is speculative and forward-looking, similar to a pre-revenue technology startup. We can derive a valuation by looking at the private market, specifically the amount of venture capital invested into building on top of Bitcoin, and applying a market-standard multiple.
• Calculation:
  1. VC Investment in Bitcoin Ecosystem: Reports from the last 18 months (covering 2024 and H1 2025) show a surge in VC funding for projects building on Bitcoin, including Layer 2s, Ordinals marketplaces, and DeFi on Bitcoin. The total capital raised in this vertical is estimated at $8 billion.
  2. Ecosystem Multiple: In high-growth tech sectors, it is common to see ecosystem values at a significant multiple of capital invested, reflecting future potential, network effects, and intellectual property. A conservative multiple for a burgeoning ecosystem like Bitcoin's is 25x. This reflects the high-risk, high-reward nature of these early-stage ventures.
• Valuation:
  • Tech Platform Value = Total VC Investment × Ecosystem Multiple
  • Tech Platform Value = $8 billion × 25
  • Tech Platform Value = $200 billion

The growth of the Ordinals market, which has already generated billions in transaction fees and trading volume, provides tangible evidence that the Bitcoin blockchain can be a viable host for complex applications, justifying this forward-looking valuation.

4. Sum-of-the-Parts (SOTP) Calculation and Price Target

Now, we aggregate the valuations of the individual components to determine the total fundamental value of the Bitcoin network.

Component	Valuation Methodology	Value (USD)
Store of Value (SoV)	Comparable Asset Analysis (vs. Gold)	$2.475 trillion
Transactional Network (MoE)	Transactional Value Model	$0.075 trillion
Technological Platform	VC Benchmark Analysis	$0.200 trillion
Total SOTP Network Value	Sum of the Above	$2.75 trillion

• Deriving Price Per BTC:
  • Total SOTP Value: $2,750,000,000,000
  • Circulating Supply of Bitcoin: ~19,800,000 BTC
  • SOTP Price per BTC = Total Value / Circulating Supply
  • SOTP Price per BTC = $2,750,000,000,000 / 19,800,000 = $138,889

5. Market Sentiment and Speculative Factors

Our fundamental valuation of $138,889 must be contextualized with current market sentiment, which is often a primary driver of short-term price action.

• Technical Analysis: Current technical indicators present a mixed but leaning bullish picture. While short-term charts show some consolidation around the $115,000-$120,000 range, the long-term weekly and monthly charts remain in a strong uptrend, with key moving averages providing solid support.
• Analyst Price Targets: Mainstream analyst price targets for year-end 2025 and early 2026 are converging in the $150,000 to $170,000 range, as cited by figures like Anthony Scaramucci. These forecasts are largely driven by historical cycle analysis centered around the Bitcoin Halving event, which has historically preceded parabolic bull runs.
• Derivatives Market: Data from the derivatives market shows a healthy level of open interest in futures contracts and a put/call ratio that suggests investors are hedged but not overly bearish, indicating a stable foundation for further price appreciation.

These factors suggest that while our fundamental valuation is $138,889, market momentum could easily carry the price higher in the short to medium term.

6. Investment Thesis & Recommendation

Our SOTP analysis reveals a fundamental value of $138,889 per BTC, representing a 17.2% upside from the current price of ~$118,500. This valuation is anchored in the robust and growing adoption of Bitcoin as a legitimate macro asset ("Digital Gold") and is further supported by the tangible growth of its underlying technology stack.

In conclusion, the "parts" of Bitcoin's value proposition are all trending in a positive direction. The Store of Value thesis is firmly intact, while the Transactional and Technological layers are showing promising signs of exponential growth. The calculated discount to its fundamental value offers investors a compelling entry point for an asset with significant asymmetric upside potential.

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