"The intrinsic value, the way I measure it is transactions. And I do kind of a simple regression with number of transactions and velocity. And you get an intrinsic value somewhere in the $8000s," said Kelly.
Last year's 1,800 percent meteoric rise in bitcoin peaked at over $19,000 in mid-December. Since then, the world's largest cryptocurrency has fallen about 50 percent to around $9,500 on Thursday morning, according to the CoinDesk index, which averages prices from the world's leading exchanges.
Despite the slump and his prediction for further downside, Kelly told "Squawk Box" he would never consider shorting, or betting against, bitcoin.
"This is such a young technology. To short it, makes absolutely no sense in terms of the risk/reward because this thing can move 20 or 30 percent in a day. So the most I'm going to make is 100 percent of my downside [over time]. And the worst is I'm going to lose 30 percent in a day. And then compound that," Kelly said.