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Bitcoin - a Little Perspective to Get Through the Bleeding

If you had Bitcoin since early 2017, you are not sweating this current correction. If you trade ETFs and bonds, and jumped into bitcoin at 20K in December, its you against the world. 

In times like these, I offer a quote and a brief look at Bitcoin's price history:

Quote: "New technology is often overvalued in the short-term, but often undervalued in the long-term." (someone smart)

(I can't remember who said this. If you know, please let me know in the comment).

In 2017, bitcoin broke into mainstream. We can see the burst of curiosity not only in the increase in number of investors but also in how much people searched bitcoin.

google trends (1/30/2018)

Take a look at 2013 and 2014 below. Note that there was also a burst of curiosity, and an eventual capitulation. 

That 2013-2014 swing in curiosity was accompanied by a meteoric rise in price and an eventual dip. Remember that liquidity was lower back then, and fewer numbers of traders were needed to push price up. At this point, an annual pump of 5595% probably won't happen again unless the USD faces an existential crisis. 

I got this following data from the book: Crypto Assets by Chris Burniske and Jack Tatar, who got it from CoinDesk. 

2011: 1473%
2012: 156%
2013: 5595%
2014: -59%

2015: 37%
2016: 123%
2017: 1300%
2018:? probably (-)

I think we should expect our experience with bitcoin in 2018 to be similar to that in 2014. 

I the long-term, I think most people still underestimate what bitcoin/blockchain can do. The short-term overvaluation of 2017 is finally over, though we still might see price snowball lower. 

Pay attention to the developments in 2018, because it can lead to a great run later in the year and into 2019. As far as for the first half of the year, expect some more bleeding and the doldrums.  

 

Bitcoin Valuation Framework 1.0

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