Zero Hedge 
November 11, 2013
It took literally minutes following our report from yesterday that in addition to the ECB and Fed, it was the Senate’s turn to finally shine the spotlight on the most notorious electronic currency with a hearing titled “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies ” next Monday, for Bitcoin to tumble 25% from its all time high just shy of $400, to $290 within 12 hours, in large part answering our rhetorical question if “the one thing that can finally end the dream of Bitcoin holders arrive soon: when the government, and existing monetary authorities, start taking it seriously.” They appear to be doing just that, which is why additional upside from here may be in the eye of the Cray supercomputer-armed NSA beholder.
So yes: Bitcoin is volatile. Very. That much is clear. But what is not so clear, and perhaps a key reason for this volatility, is just what the fundamental, or intrinsic value of BitCoins is when one strips away the pure euphoric momentum to the upside or downside.
To answer that question, we go to Raoul Pal, head of the Global Macro Investor, and his November 1st recommendation to “Buy Bitcoins”(when BTC was $210 so nearly a 100% return in 1 week) which among other things attempts to “value BTC using a macro framework” or, in other words, the first supply-demand driven fair value assessment of BTC.
His take, and price target, in a nutshell:
A fudge, but not a stupid one
Let’s use a broad guesstimate. One Bitcoin should theoretically be worth 700 ounces of gold or pretty close to $1,000,000, if we adjust existing supply of both to equal eachother.
One BTC is currently worth 0.14 ounces of gold.
That gives BTC an upside of 5000 times to equal the current price of gold, supply adjusted. Clearly, I and everyone else believes that Gold may well be much higher than here in the next 5 to 10 years, thus versus the US Dollar the upside for BTC could be multiples of that.
Now, before you shake your head, simply go back to the chart of Gold versus the US Dollar and just recognise that it has risen 8750% since the 1920s. And just remember that Microsoft rose 61,000% from its IPO to it’s peak.
Considering what we know about the world, I personally believe that Bitcoin may well explode in value as more and more people begin to use it.
If you stuck $5,000 into Bitcoins and each Bitcoin did go up to a gold equivalent of let’s say, only 100 ounces of gold (not the potential fair value of 700), then at current prices your Bitcoin stash would be worth $3.3m.
Now that’s what I call a tail-risk option. It’s either worth zero or it’s worth a truly outstanding amount of money.
I bet you never thought you’d see this in a macro publication. But I’m serious. This just might work.
Read on in the attached pdf below (link )