Seven methods for valuing Bitcoin, from network metrics to stock-to-flow

Bitcoin has gained 26% in the last four months, with last month's advance occurring as senators deliberated the Clarity Act. Even after that bill was voted down in the Senate, the cryptocurrency held on to most of those gains, as reported by Dow Jones Newswires (via MarketWatch). Yet the issue of Bitcoin's true worth remains one of the most hotly debated topics in financial markets, mainly because, unlike stocks or bonds, it offers no cash flow, earnings, or balance sheet to anchor a valuation.

John Laforge, chief alternatives strategist at Ned Davis Research, tackled this issue head-on in a note released Wednesday, cited by Dow Jones Newswires. He outlined seven distinct frameworks for valuing the digital asset, each tailored to different scenarios and each carrying its own limitations. The firm's broader long-term forecast, which is separate from Laforge's methodology piece, projects Bitcoin reaching around $170,000 by 2030 and as high as $230,000 by 2035.

Why it matters

For those newer to crypto, exploring these methods is less about pinpointing a single "correct" price and more about recognizing that different valuation frameworks address different questions—and confusing them is a frequent source of misunderstanding. A model built for the next few quarters isn't designed to determine where Bitcoin sits within a five-year cycle, and a metric reflecting miner sentiment isn't equivalent to one gauging investor demand.

The seven approaches

According to Laforge's note, as cited by Dow Jones Newswires:

• Network adoption. Laforge views this as the approach best suited to Bitcoin itself, since it's the only one derived entirely from Bitcoin's own data rather than comparisons to other assets. It monitors direct and ETF-based holdings, along with the number of addresses with a balance and those transacting daily.
• Comparison to similar assets, particularly gold. This treats Bitcoin and gold as comparable because both act as bearer assets, meaning ownership doesn't require a third party's involvement, in a financial system otherwise built on credit and intermediaries.
• Money-supply growth. Laforge suggested this is likely the most valuable lens for the next several quarters. Ned Davis Research discovered that Bitcoin tends to perform well when money-supply growth exceeds 4%, and to falter when the money supply shrinks by a similar amount.
• Cost of production. This serves best as a sentiment indicator rather than a price forecast, and it can hint at when miners might sell. CoinShares estimated the average cost to mine one Bitcoin among listed miners at about $75,500 in the second quarter. Laforge noted the metric becomes truly useful when the production cost sits well above the market price for an extended period, since that's what drives financially strained miners into forced selling and can signal a cycle bottom.
• Risk-based position sizing. Instead of a price goal, this method asks how much Bitcoin an investor should hold. Based on historical price data, Laforge found that a 1% portfolio allocation adds roughly 2% to overall portfolio risk, a relationship that escalates steeply, with a 4% position translating to about 14% of total risk.
• Adoption cycle analysis. Laforge described this as an imprecise method that works best when paired with several other techniques rather than used on its own.
• Stock-to-flow. One of the more popular models, it divides existing Bitcoin supply by the annual amount added. It's also the method Laforge is most doubtful about, pointing out that its price predictions have missed by hundreds of thousands of dollars in recent years. He believes the model puts too much weight on supply and too little on demand, and demand simply hasn't grown quickly or substantially enough to support some of its more ambitious forecasts.

What readers should watch or consider

No single method here is being offered as definitive, including in Laforge's own assessment. The practical takeaway is to align the method with the question being posed: network adoption and money-supply growth for insight into Bitcoin's own fundamentals over the coming quarters, cost of production as an early-warning sentiment signal around miner capitulation, and position-sizing math for portfolio construction rather than price discovery. Stock-to-flow's recent performance is a good reminder that popularity and predictive precision aren't the same thing.

What could change the interpretation

Ned Davis Research's own long-term price projections, mentioned above, stem from separate analysis and shouldn't be interpreted as the result of any one of these seven methods. If money-supply growth figures or ETF and address-level adoption data shift materially in the months ahead, that would challenge Laforge's view on which methods matter most right now.

What to watch next

Keep an eye on money-supply growth data given Laforge's belief that it's the most pertinent indicator for the coming quarters, along with Bitcoin ETF flows and address-adoption figures as a gauge of network adoption. If Bitcoin's market price dips meaningfully below the miner production-cost estimate of roughly $75,500 for an extended stretch, that would be a classic sign, according to Laforge's own framework, of potential miner capitulation and a possible cycle bottom.