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Bitcoin leaves everyone in dark on true worth

After snapping slide.
Image: Bloomberg

Bitcoin steadied Tuesday after flirting with a bear market in a plunge that left investors grasping for clues about what lies ahead for the world’s largest cryptocurrency.

The digital coin rose as much as 8% to about $36,600, but the move higher pales compared to the gyrations that took Bitcoin to an all-time high of nearly $42,000 on Jan. 8 before a precipitous slump over Sunday and Monday.

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The latest bout of roller-coaster volatility recalls past boom and bust cycles including the 2017 bubble, and has investors debating whether this is a healthy correction or the end of the latest bull run for cryptocurrencies.

“We think a pull back is healthy,” said David Grider, lead digital strategist with Fundstrat Global Advisors LLC, who added he doesn’t think the recent price action indicates that Bitcoin has already topped out.

Investors who bought the digital coin a year ago are still sitting on gains exceeding 300%. Pinpointing who is mainly responsible for the rally is one of the many crypto mysteries — Bitcoin funds, momentum chasers, billionaires, day traders, companies and even institutional investors have all been cited.


Just as hard is working out what caused the recent two-day drop of as much as 26%. For some, a bounce in the dollar may be among the reasons. The greenback has snapped a prolonged losing streak after rising U.S. government bond yields bolstered its allure.

“The dollar is showing strength,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore.

Ayyar is monitoring what happens if the U.S. Dollar Index climbs to 92 from the current level of about 90. “If the dollar powers through that level then we may have seen a Bitcoin top at $40,000,” he said.

At the same time, the world remains awash with monetary and fiscal stimulus, and some of that wall of money could yet gravitate to crypto assets.

Bitcoin believers continue to tout the digital currency as a viable hedge for inflation risk and the potential debasement of fiat currencies. Some forecasts for its long-term price range from $146,000 to $400,000.

“As long as the world is flooded with money and safe assets offer poor compensation, Bitcoin will be relevant,” Howard Wang, co-founder of Convoy Investments LLC, wrote in a Jan. 10 note. “Volatility and asset bubbles will be a fact of life.”

© 2021 Bloomberg L.P.

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There is no “true worth” …. only speculation. Hence “the the recent two-day drop of as much as 26%.”

The stats on crypto does not reflect the liberation of common person as many state that it is. Approximately 95% of all BitCoin is owned by less 2% of accounts. The amount of transactions that use BitCoin for payments versus changing real money into BitCoin is staggering, so BitCoin is not used as a real currency for payment of goods or services (HODL gang). If something is meant to do something specific but is not used for that specific thing, how useful or valuable is it?

And of course if 95% of all BC is owned by 2% of accounts, the usual human temptation to do some sly deals could surely be possible? Hmmmm ….

Source for the stats was a Bloomberg article on 18/11/2020. It also said that more than 70% of accounts had less than 0.01 BitCoin in them. That makes one think.

What would happen when the cap of 21 million units of bitcoin is reached? Will there still be a demand for it? What can bitcoin do for you that ordinary currency can’t? I know bitcoin is currently seen as an asset and not a currency but normally an asset is something with a measureable value. To me bitcoin at this stage is still just some unique string that an IT boffin came up with and I still can’t see why I should “invest” in it. Maybe that will be my downfall, maybe not… I am waiting for a mainstream crypto currency unit trust before I might start experimenting, but that still won’t solve my problem of wanting to know what actual value crypto currencies can add to the world. Maybe crypto will take over as currency, maybe not…

Easy equities has a “mainstream” etf type basket of crypto known as EC10.

Thanks

Crypto cannot be valued by traditional Asset Manager skills/qualifications (typically a CA, Honours in Investment Management, etc).

The best asset manager for a crypto, one would need to employ psychologists, human behavioural experts.

(I even doubt if Technical Analysis will work on crypto…)

End of comments.

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