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HEALTH, WEALTH, AND HAPPINESS |
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| "Industry, thrift and self-control are not sought because they create wealth, but because they create character." - Calvin Coolidge |
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| Valuing Bitcoin (Fidelity): "Why would we buy an asset if don't know its fair value?" This is the question that begins this new report from Fidelity's growing Digital Assets division.
(Of course, people buy assets all the time without knowing the "true" value: fine art, Tesla stock, undeveloped land, domain names, etc.)
Fidelity introduces two models that may help crypto investors value bitcoin: the stock-to-flow model and the network effects model (representing the supply and demand side, respectively). |
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| On the supply side, if you buy Fidelity's reasoning on bitcoin scarcity, the clear implication from the chart above is that Fidelity is predicting bitcoin will be worth $1 million some time in 2025.
On the demand side, Fidelity must be subscribing to Bitcoin Market Journal because they're talking about network effects, one of our favorite topics: |
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| This chart shows the adoption of various technologies over the last 125 years. The implication is that as bitcoin approaches 100%, the increasing demand -- combined with limited supply -- will drive prices ever higher.
Investor takeaway: Our view is different. There is no guarantee bitcoin will be as ubiquitous as the Internet: it may never reach 100% of the population unless it can truly become a global currency (which is unlikely unless we can stabilize the price).
That said, the stock-to-flow model is useful -- and has so far been remarkably accurate (see below). |
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The Fidelity S2F model is based on research by an anonymous investor named PlanB: here's the original blog post from 2019. Back then, he or she predicted that bitcoin would hit around $55K after the May 2020 halving (it did, in March 2021). |
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| If you'd like to see a real-time stock-to-flow model, click here.
Investor takeaway: The rainbow line is the current price of bitcoin, while the blue line represents the "fair" price predicted by the supply.
We're not big fans of price prediction, but this model -- if correct -- suggests that bitcoin today is extremely cheap (which intuitively we feel is correct).
From $20K today to $1 million in 2025. Who knows? Maybe Fidelity is on to something after all. |
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Hi everyone,
They say it's always darkest just before the dawn, but even the most short-sighted people never seem to stop believing that the sun will shine again. So, what is it with financial market cycles that have people consistently panic selling the bottom and FOMO buying the top?
It makes little sense to me, but then again, I've been following the markets my entire life and have seen the process of greed and fear play out countless times over the years. As our head crypto analyst Lou Kerner recently wrote, "Markets are nothing but a never-ending series of bubbles & crashes, just like the sun is a never-ending series of sunrises and sunsets."
Yet, for some reason as the price has been coming down, the question of whether the industry is dead is once again trending. |
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Over the weekend, we saw bitcoin dip below $20,000 for the first time in history. This key psychological level has marked notable resistance throughout the asset's short history and blocked it on the way up but has never really acted as any kind of notable support level on the way down, until now. |
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Would you believe me if I told you that I was just a little disappointed to see it come off the lows? Some people might be scared right now and the fear and greed index is about as low as it's ever been, but I'm getting serious FOMO. |
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Magic Words
At the weekend lows, the price per bitcoin was down approximately 75% from its all-time highest level marked last November. Yet, at the same time, it was about 75% above what it was in February 2020 before the start of the global pandemic. There are four magic words that will make you money in the markets every time, and they've been repeating in my head recently in a crescendo that keeps getting louder: "buy low, sell high."
Many thanks to Bloomberg's Tanzeel Akhtar for amplifying the sentiment even further and to fortune magazine who's picked it up as well... |
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Bitcoin isn't dead, far from it. Despite the sentiment and price action, the network keeps growing. In fact, the amount of value flowing through the bitcoin blockchain has never been higher. Here we can see the average daily transaction value over the last 90 days reaching a new all-time high of $65 billion. |
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| So, even though many crypto exchanges that have been expanding rapidly during the bull market are now laying off significant portions of their workforce, the smart money is accumulating at this time. Our on-chain analyst Jan Wüstenfeld noted the accumulation trend score on Twitter, indicating that whales are still accumulating. Recent data from Binance revealed that their clients are currently buying the dip. And QE's Socio-economic analyst Olumide Adesina also noted that companies are adopting blockchain at a rapid pace despite the risk-off sentiment in the markets.
It's not just whales accumulating either. I'd like to wish a warm welcome to 13,091 wallet holders that have become whole-coiners over the last week. |
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| Best regards,
Mati Greenspan Analysis, Advisory, Money Management |
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Guess which one will get paid the most? |
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| Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It is created by Evamarie Augustine, Charles Bovaird, Mati Greenspan, John Hargrave, and Alexandre Lores.
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