Bitcoin True Value Zero? Are We Crypto Perma Bears?


The perspective that most has of bitcoin ranges from the total lack of knowledge to the certainty that the world will change. There are no real foundations for analysts who even attempt to evaluate it on the basis of traditional methods, for example Avi Gilburt and Ryan Wilday .

This certainly did not prevent everyone from giving their opinions based on their feelings .

Yes, most of what you see presented on the evaluation of bitcoin (BTC-USD) is nothing more than the feelings of analysts. In fact, I read an article a few days ago that provided the perfect example of this phenomenon seen in the cryptocurrency market.

Geoffrey Caveney gave us his feelings about the bitcoin: "When I say there is a good chance that the bitcoin price will be less than $ 1,000 by next year, I understand that good possibilities is not a precise sentence Here is a more complete explanation of what I mean, in two paragraphs that are not part of a title: If we had a game of riddles, and we had to guess what will be the lowest price range of the bitcoin in the rest of the 2018 and all of 2019, my guess would be about $ 900 to $ 1,000. I think it's about 50-50 if the real low price will be higher or lower than that. "

So, it seems like the analysis on bitcoin it has reached the point of simply guessing and trying to package it as an analysis.

However, I must note that the most accurate statement I read in that article was not of the author, but of one of the commentators: " Bitcoin has value because we say A piece of shining yellow rock in the ground is valuable because we say it does, money has value because we say it does. "

The statement used in this paragraph is because we say that he does it . This is why we say that the sentiment of the market, which is clearly not rational, pushes the stock market and market prices much more than the fundamentals. Indeed, the sentiment of the market also guides the fundamentals, and I have outlined that chain of causality in a previous article

John Maynard Keynes acknowledged that emotion drives the market more than rationality or of fundamentals when it states that "The market can remain irrational longer than you can remain solvent."

So when you want to understand the price, you have to understand that the sentiment of the market is paramount to any means of evaluation, and above all to guess.

Ryan Wilday who wrote this article with me, is a man who has lived and worked in Silicon Valley for many years, and sees the value of cryptocurrency. But do not bet or guess its value. Rather, Ryan analyzes the market sentiment when he wants to identify the price direction and the turning points.

Transparent inflation rates, against the Fed's hidden press and the protection of its assets from the banking machine, are some of the common reasons why many buy bitcoins and assign them value. Ryan agrees in these as principles, but does not tell us how to evaluate the bitcoins, since these principles are too subjective. They can arouse warm and confused feelings about bitcoins, but they do not tell us when to buy or when to sell.

It leaves us clearly desiring for any fundamental perspective on how we might try to evaluate the bitcoin. Consider the cost of mining? In May, Fundstrat said the breakeven point for bitcoin miners is $ 8.038. The extraction costs are probably higher than now, yet the bitcoins have traded below that level for months. When will the market reward the miners again? Maybe this market is not thinking about miners?

What about transactions on the blockchain? Does this tell us when we should go long and short bitcoins? Willy Woo and Dimitry Kalichki have both worked on indicators that evaluate the price of bitcoin based on transactions on its chain. Woo produced the original indicator and Kalichki modified it to make it more responsive.

And it seemed to work for quite some time. However, at this time the indicator is saying that bitcoin is growing more overvalued since its prices fall as transactions are declining.

Does this mean we should all be bitcoin perma bears? This method seems very logical for Ryan, but if the transactions are in decline much faster than the price, Houston, we have a problem! Well, if you believe this is the way we should make business decisions, we also have a problem.

I can imagine a comparison between the price of the bitcoin compared to the supply of M3 money to obtain an intrinsic value. The problem we encounter is that Bitcoin has accelerated faster than M3 and is so volatile that there is no relation to that curve. And do market operators really think of M3 when they buy bitcoins? Probably not.

The last method that Ryan finds interesting is to observe the whale portfolios those portfolios with great properties. One method is to look at the inflows and outflows of those portfolios. Large outflows should be bearish, especially when the counterpart is an exchange. The second method of looking at whale portfolios involves looking at how many bitcoins remain dormant on the sales side but are taking transactions. In this regard, we have a very bullish phenomenon. The net balance of these portfolios rose all year, with some continuing to take flows without outflows. And yet, the market has not changed.

I think the point we are trying to make is that there is no real evaluation methodology that applies precisely to bitcoins. Furthermore, "guessing" clearly will not be a reliable way in which financial decisions should be made. However, being able to track the market sentiment through Elliott Wave's analysis was a wonderful way to be able to track the price and seems to be the most accurate (and perhaps the only) way to track the Bitcoin market.

Avi Gilburt is an Elliott Wave technical analyst widely followed and founder of, a live trading room with its intraday market analysis (including S & P 500, metals, oil, USD and VXX), an interactive forum for analysts and a detailed Elliott Wave education library.

Ryan Wilday is a guest of the Cryptocurrency service on ElliottWaveTrader.

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