A cryptocurrency executive and long-term Bitcoin bull says that Bitcoin currently has a purely “narrative” value, which is 71% above the true value. Detail cryptocoin.com‘in.
The real value of Bitcoin (BTC)
Charlie Morris is the co-founder of ByteTree and CIO of ByteTree Asset. He is a long-term Bitcoin bull, but skeptical about the current value of Bitcoin transactions. Here’s how the fair value model works and how it’s positioned for the fourth quarter. As a seasoned fund manager with 17 years of experience managing a multi-asset portfolio at investment giant HSBC, Charlie Morris has spent a lot of time searching for different and interesting asset classes that could offer unrelated returns.
Bitcoin was one of the assets that caught Morris’ attention in 2013. At this point, however, he wasn’t ready to properly tap into an investor’s portfolio, so Morris instead focused his attention on the data behind the asset class. He founded ByteTree.com, an institutional crypto data provider that gives investors access to a terminal with metrics to analyze the price action of Bitcoin as well as traditional commodities like gold and silver.
Just last year, Morris returned to the idea of adding Bitcoin to investors’ portfolios with the launch of ByteTree’s asset management arm, which offers exposure to two different crypto funds. This timing was perfect. Bitcoin (BTC) has increased 375% from November 2020, with its adoption among institutional investors, retail traders, and even countries like El Salvador, where it is now the official currency. Just this week, Bitcoin hit an all-time high of around $66,000 following the launch of the first US Bitcoin futures exchange-traded fund, which already had $1 billion in assets days after its launch.
BTC “hype cycle”
Although the ETF launch sparked a bullish price action, Morris wasn’t convinced it would last. He is particularly concerned that the ETF continues to gain momentum based on the performance of past commodity futures ETFs. “Over time, they’ve drastically underperformed, and you’re going to see the same thing here,” Morris said. Now unfortunately, the more demand there is for Bitcoin for Bitcoin futures, the worse the payoff becomes. At the top of cheating cycles, you’ll get the lowest performance. Many of these become effective trading tools in the short term, where you don’t mind slipping, they don’t really notice over the days, weeks, months.”
Even before the futures ETF was launched, Morris was negative about the sentiment and price action surrounding Bitcoin. He said at the Token2049 conference in London on October 8 that Bitcoin was “overpriced” and cost no more than $28,000 according to ByteTree’s fair value model. The model calculates fair value based on network value-to-transaction ratio (NVT-BT) and on-chain data to create a fair price valuation. Morris compares NVT-IT to the traditional price-to-sales ratio in equity analysis as one of the most direct metrics for determining fair value. Drawing on 12 weeks of transaction data, the expert said that the current fair value for Bitcoin is about $36,000, which is trading at a premium of about 71%.
“We now have a price where you would normally see about $70 or $80 billion worth of Bitcoin changing hands, and now we’re at $50 billion,” Morris said. Since I spoke at that conference, that gap has closed by $10 million, so the chain is picking up, but right now this is definitely trading on narrative.” Despite his short-term skepticism, Morris remains long-term bullish on Bitcoin. He believes the market is ahead of things right now. “We’ve had Bitcoin below fair value four times in the last 12 months, but never since June,” Morris said.
Morris said that Bitcoin could continue to rise, with 2021 being the year of the Bitcoin narrative. However, it’s not just about Bitcoin. Morris believes this is driven by the broader bubble seen in a number of asset classes. “People get caught up in cash flows in a zero-rate world,” Morris said. You have this big bubble in just about everything, bonds, stocks, and the like. Now you understand that inflation is coming. And until they hit the brakes, I think the bubble is in many asset classes, not just crypto.” With Bitcoin now hitting new record highs, Morris hopes this could draw a lot of money into the potentially bullish space. Morris’ general fund is currently fully invested in crypto, with 80% allocated to Bitcoin and 20% to Ethereum.
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