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00:00It feels like the bulk of the trading when it comes to Bitcoin has been done on the technicals if you look at it through a prism of fundamentals. How do you how do you assign a valuation to bitcoin. Handy crypto currency. Well thanks Heidi. It is . You're absolutely right. The trading has been all and technical so far on price movement. The value is highly uncertain. So you need a very big range I think in my piece I said something between two thousand two hundred thousand dollars for bitcoin . So it's not going to help you decide whether or not to buy or sell at 18000 or 19000. But it does have some real value trust list value exchange it's going to be very big. The value is probably going to be captured by crypto currencies although there are alternatives that might occur. And my feeling is bitcoin is going to be the funding currency for that. So people who are buying bitcoin today on a fundamental basis are doing it not because they believe bitcoin will be a great transaction currency or a great store of value but because they think that's the way they're going to fund the whole space of crypto currencies which I might describe as a thousand Silicon Valley startups Yeah and crypto innovations you say it's it's fascinating isn't it because you hear about the way the central bank has Janet Yellen here at the RBA. I'll be NZ I still talking about bitcoin. Their criticism is it's kind of failure or weakness as a digital payment currency. It's not really viewed as such by Bitcoin enthusiasts anymore. That's correct. I think there have been many superior coins dash like coin Bitcoin Cash even for the purpose of transactions and I don't think we're going to have one dominant transaction currency either. Wouldn't surprise me to see five or six for different purposes but as a funding currency one that will actually look up to Wall Street . One that you can buy and sell in large quantity with low spreads . I think there's probably only room for one. And I'm pretty confident could be a quite right. There was the early mover the first mover here or one of the first mover. Right there also in many ways the best design. You know the other cryptocurrency is in some sense kind of weak in the bitcoin design in order to make it more convenient. Yeah the one you'd really trust the only one you would say is like gold. Something you could put away and lock away and trust it's Bitcoin . Aaron you've been valuing bitcoin since quite 2012. 2012 right . So is it. Has it become easier to value Bitcoin now than five years ago. When I started it was easy because it was the only one then for a long time I was saying you know Bitcoin really isn't gonna be a winner here that these other currencies are better at various things. Now I've kind of swung back and now I feel the opposite that buying Bitcoin is your way of getting exposure to crypto currencies and valued like that it's actually much easier . We don't have to guess what crypto currency is going to win . Interesting I want to play for you a I want to replay for you a comment from from Andrew left of Citron Research who's a short seller says there really is no bull case on Bitcoin. I just want to hear here. I want you to hear what he says about this . Unfortunately I think that people who are buying the BTC right now are people who believe that the market to actually regulate that maybe there is some oversight and don't realize I mean they're just buying for letters that happened to associate itself with bitcoin without realizing you could put the people who own the grayscale trust next to me right here. There is no bull case to owning this OK. Certainly only somewhat the bitcoin investment. I totally agree with that. There's absolutely no reason to pay 100 percent premium to buy bitcoin because you can buy it. You can go to Coinbase and buy it with no premium at all. And if you're an institution you can go to a future I here people doing it then. I honestly don't know and it to me it's a symptom that we have not really integrated Bitcoin with the financial markets yet that spirit has to go to zero or at most 5 percent or something before we think bitcoin has really entered the financial markets. Also the spread between futures and cash has to go down in the calendar spread has to go down. There's no reason for it to spread. Do you think Erin that that's just going to evolve naturally or what . What can help accelerate that process. It's not so much during the process. It's there there's two paths we could take. One is that yeah we integrate and bitcoin just becomes another financial asset but also one that can fund crypto currencies and then it has a high value or we could go with it's just disconnected. I mean it was invented to be an alternative the financial system and it disconnected Bitcoin has a lot of value too. But it's hard to put a dollar amount on it . Yeah and to kind of try and put a dollar amount on you say that you have a ballpark which is you know whatever percentage the internet comprises when it comes to the global economy. I mean these are really analogies to correlated. Actually let's say when it comes to Bitcoin and economic activity in that Internet tech space. Well it's not internet tech space it's trust this value exchange so to the extent people want to do the kinds of things that crypto currencies allow micro payments trust was payments for all kinds of services then it could be a a big part . My guess was 2 percent of the world economy the Internet is about 6 percent of the global economy. I think priceless value exchange could be 2 percent. That means it replaces an awful lot of things for things that are funded by advertising. Matt Lavina Bloomberg had an interesting column where he said you know we're paying for all of our technological innovation. You know our Myers program our driverless cars it's all being paid for by Internet advertising and that's pretty crazy. It should be paid for by venture capitalists who are assessing the possibility of these events. I think cryptocurrency could absolutely replace advertising as a funding vehicle for long shot science fiction me research .

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Fmr. Risk Manager Says Bitcoin's Value Is Uncertain

Aaron Brown, former risk manager at AQR Capital Management, discusses assigning a valuation to bitcoin, bitcoin as a digital payment currency and his outlook for cryptocurrencies. He speaks on "Bloomberg Daybreak: Australia." (Source: Bloomberg)

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