It’s been less than nine months since traders flipped their calendars to 2018, but cryptoasset bulls have aged years (if not decades!) since the holiday season’s euphoria. After peaking at a total market cap above $800B on January 7th, the crypto market has contracted precipitously, briefly falling below $200B earlier this week:
Source: Coinmarketcap.com, FOREX.com
Of course, cryptoassets are infamous for its massive bull-bear cycles, and the 2018 bear market is hardly unprecedented. Back in December 2013, total cryptoasset market cap peaked above $15B, up nearly 2,000% from the summer’s lows, before collapsing to just over $3B in January 2015. Based on the template of a full-year, 80% decline in the market, further declines cannot be ruled out.
Over this period, we’ve seen the Bitcoin’s “dominance”, or Bitcoin’s market capitalization as a proportion of the total crypto market’s capitalization, steadily grind higher:
Source: Coinmarketcap.com, FOREX.com
In other words, Bitcoin (-70% from its peak) has held up relatively well compared to altcoins like Ether (-80%), Litecoin (-85%) and Ripple (-91%). Looking at these figures, an old investing joke comes to mind: “What do you call a stock down 90%? A stock that was down 80% and then got cut in half!” In order to help our readers minimize the risk of seeing their investments get cut in half, we analyze bitcoin from a fundamental, sentiment, and technical perspective below:
1. Fundamental: Usability and Investability Quietly Improving
As a nascent asset class that doesn’t produce an income stream, traditional fundamental analysis techniques such as discounting future cash flows are not useful for cryptoassets. While some of the valuation work done from an economic perspective (including MV=PQ formulations) has potential, the truth is that future “speculative” value dwarves any reasonable assumptions about bitcoin’s present value.
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