Sentiment speaks: can the true value of Bitcoin be zero?


The perspective that most of Bitcoin has from the total lack of knowledge to an absolute certainty that will change the world. Moreover, there are not really real "foundations" with which analysts are able to try to evaluate it based on traditional methods. But this has certainly not prevented everyone and the mother to provide their opinion based on their "feelings".

Yes, most of what you see presented on the evaluation of Bitcoin is nothing but "feelings" of analysts. In fact, I read an article a few days ago that provided the perfect example of this phenomenon seen in the crypto-currency market. In a recent article, Geoffrey Caveney gave us his feelings about Bitcoin:

When I say that there is a "good chance" the price of the bitcoin will be less than $ 1,000 by next year, I understand that "good odds" is not a precise sentence. Here is a more complete explanation of what I mean, in two paragraphs that do not fit in a title:

If we had a game of riddles, and we had to guess "What will be the lowest price range in which bitcoins are exchanged during rest of 2018 and all of 2019? ", my hypothesis would be around" $ 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 that the analysis on Bitcoin has come to 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 it does. A piece of bright yellow rock in the ground has value because we say it does so. Money has value because we say it does.

The statement used in this paragraph is "why do we say it does". 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. In fact, the sentiment of the market also drives the fundamentals, and I have outlined that chain of causality in this previous article.

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

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

Ryan Wilday, who co-wrote this article with me, is a man who has lived and worked in Silicon Valley for many years and sees value in the cryptocurrency, but does not bet or guess his value, rather he analyzes the feeling of market when wanting to identify the price direction and turning points.

Transparent inflation rates, compared to the Fed's hidden press and the protection of its assets from the "banking machine", are some of the common "reasons" to which many buy a little. coin and give it a value. Ryan agrees in these as principles, but does not tell us how to evaluate Bitcoin, as these principles are too subjective. They can arouse lukewarm and confused feelings about Bitcoin, 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 Bitcoin. Consider the cost of mining? In May, Fundstrat published that the break-even point for Bitcoin miners is $ 8,038. The extraction costs are probably higher than now, yet Bitcoin has been trading below that level for months. When will the market reward the miners again? Maybe this market is not thinking about miners?

And the transactions on the blockchain? Does this tell us when we should go long and short Bitcoin? Willy Woo and Dimitry Kalichki have both worked on indicators that evaluate the price of Bitcoin based on transactions on its chain. Mr. 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 that we should all be Bitcoin permits? 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, we also have a problem if you believe this is the way we should make business decisions.

I can imagine a comparison between the price of Bitcoin and 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 Bitcoin? Probably not.

The last method that Ryan finds interesting is to look at the "whale portfolios" (those portfolios with large stocks). 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 accurately to Bitcoin. 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.

Housekeeping Matter [19659020] Note that the articles are now only sent to those who have chosen to "follow me". So, if you'd like to receive notifications about when my articles are posted, please press the top button for "Follow me". In addition, we invite you to also follow Ryan, as it will publish regular updates on cryptocurrencies.

Disclosure: I have / we have no positions in any of the above titles, and we do not intend to start any position within the next 72 hours.

I wrote this article alone, and expresses my opinions. I'm not getting compensation for this. I have no business relationship with any company whose title is mentioned in this article.

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