A Short Note on Bitcoin Valuation

We know now that Bitcoin moves a lot more like FAANG stocks than Gold. It is not an imperfect hedge or even a reliable store of value. It is not a security because most regulators can’t agree on what a “security” is – except that it is traded like securities (with futures and proposed ETF) and it is not a commodity, because well, you can’t see it.

Its numerous skeptics put its value at zero. My broker puts the value of a stock pledged as margin, when is a small or midcap stock at … zero after a 100% haircut – it doesn’t matter to my broker if its EPS is growing at 50% CAGR. Value is in the eye of the beholder.

To the Romans, early Christians were a nuisance but to its believers – they were witnessing a miracle. Similarly, old finance tends to see Bitcoin as either a useless or dangerous nuisance, while the zealots value it bizarrely between 10k to 100k.

What is noteworthy is an anonymous creator and “immaculate conception” of some trustless token that is not backed by sovereign guarantee but is still secured and scaled by a collaboration of unpaid programmers across borders. A miracle, after all, is something that cannot be replicated.

So what is the fair value of one BTC in USD/Yuan/Rupee?

Doesn’t matter because 1 BTC = 1 BTC.

Bitcoin above $3000. Is it too late to buy Cryptoassets?

NOTE: This post is NOT Buy or Sell advise. Cryptocurrencies are very volatile, are subject to legal / regulatory risk and also carry a risk of permanent capital destruction.

Bitcoin went past $3000 as “segregated witness” or Segwit, the latest version of its open source code is days from locking in to the nodes on its blockchain on August 8th, 2017.

Segwit aims to solve Bitcoin’s long standing scaling problem and serves as a positive fundamental trigger to its price. For stock investors, imagine capacity expansion without the capex. True to fashion, the market bought the rumor before the news and pushed the price above the last all time high of $3019 in June.

This move caught many technical analysts by surprise, as Bitcoin – honey badgerlike – continues to shrug off bad news and humiliate market oracles. I think what is most significant is that the long-term underlying bullish trend has been confirmed this week, which means the odds of a major Bitcoin “crash” have plummeted and a $5000 to $10,000 Bitcoin price is now in sight.

Suprise! While the RSI and other momentum indicators suggested a correction the breakout in the simple moving average confirmed the direction of the trend.

So is it too late to enter? Bitcoin has no intrinsic value. The fair price is unknown. The market price is determined by demand and supply. It has gone up too much too fast. It’s in a bubble. All of this fear, uncertainty and doubt is legitimate but not in the ways one might think. Continue reading “Bitcoin above $3000. Is it too late to buy Cryptoassets?”

Bitcoin and Ethereum: The Puzzle of valuing Cryptocurrencies