Pricing Bitcoin: MORE Gains or OVERVALUED??

Mar 21, 2021

📝 Valuing in Difficult 📝

Bitcoin does not fit into most of the financial models that we tend to use in traditional finance. When you are looking at Stocks or Bonds, these are usually considered to have "Value" because they either give you a stream of income or they give you ownership of an asset that generates income. Unlike raw commodities, there is no use end use case for Bitcoin. Oil is used for power. Gold can be used for Jewelry. So, when it comes to valuing Bitcoin we have to use bespoke models that take into account historical prices, on-chain data, network effects, scarcity, supply and demand.

📈 Stock-to-Flow 📈

This was the model that was developed by a famous analyst called PlanB. Essentially, it is a measure of the supply of a particular resource relative to the rate of supply growth. It's a ratio of the outstanding "stock" to the flow of that resource. This model has previously been used to value other scarce resources such as precious metals (gold, silver etc). Gold currently has a S2F ratio of 65 whereas Bitcoin has a ratio of 56. However, Bitcoin's is always increasing as it goes through those halving events. PlanB found a really strong statistical relationship here and has extrapolated it out into the future. Using the model, here you have what the theoretically price of Bitcoin should be based on the S2F. And here we have the actual price of Bitcoin overlayed on top of it. As you can see, it has been tracking it pretty damn well. We could be seeing a bitcoin price of 100k by as early as May.

📈 Relized Capitalisation 📈

It is a measure of the aggregate cost basis of all the Bitcoin that has ever been moved. It is calculated by taking the price of each Bitcoin at its last on-chain movement. Those coins that last moved back in 2012 will have much less of an impact on the market cap than those that moved yesterday. The goal of this metric is to try and de-emphasize the impact that these older coins will have on the market cap.

📈 Spent Output & Hodl Waves 📈

What Spent Output shows is the percentage of all spent output that were created within a particular age band. Each of the lines over here represent the percentage of spent outputs that were created in the time bands highlighted. It is an indication of how much the longer term holders are holding their coins and whether most of those coins that are currently being moved are newer entrants into the market. Another hodl metric that you guys may like from Glassnode is what they have aptly named their "Hodl waves". These basically represent the proportion of certain supply that is held by UTXO's with different life spans.

🐋 Whale Addresses 🐋

One of the most reliable indicators out there is just to examine the number of wallets that have more than 1,000 Bitcoin in them. If there are more wallets with 1k BTC in them it will show that these whales have been accumulating their coins and hence they have a view that Bitcoin could have value at these levels. The number of wallets with 1k BTC in them has been on a steady incline over the past year. This may have taken a dip recently but this is only because these whales have been moving their coins to a custody solution of some type.


📜 Disclaimer 📜

The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading Forex, cryptocurrencies and CFDs poses considerable risk of loss. The speaker does not guarantee any particular outcome.