After the article was published the day before yesterday, many readers left messages asking what the reasonable valuation of Bitcoin is?
This is also a question I have been thinking about, because it determines the operations I may take next year.
Let me give my answer: To be honest, I still can't give a clear valuation. But I have roughly figured out a line of thinking for your reference.
Since we need to estimate the valuation, we first need to have a time limit.
I still believe that the peak of this cycle will be next year, so the valuation discussed in this article today is my estimate of the peak of Bitcoin's market next year.
With a time limit, we then need to find a benchmark, and this is the most difficult part of Bitcoin's valuation.
- Based on Bitcoin's characteristics, it is like gold, but it also has significant differences from gold - its production cycle decreases periodically.
- It is a crypto-asset, but unlike other cryptocurrencies (such as Ethereum), it doesn't have much functional or value-enabling services.
The information we currently know is only these, so my benchmark can only be derived from these two perspectives.
Some readers mentioned comparing Bitcoin's total market capitalization with gold.
I did calculate it this way when estimating the long-term valuation.
In the previous article, I mentioned that in my vision, Bitcoin's market value will surpass gold in the future. But that is the "future" and not the near term.
I think that "future" is conservatively 13 years from now. In these 13 years (not counting this year), if we look at a doubling of the peak-to-peak cycle every four years, then it would be $250,000 in 2029, $500,000 in 2033, and $1 million in 2037.
This doubling of the peak-to-peak cycle is the growth rate.
Looking at the data from the last two cycles, the peak value in 2017 was over $19,000, and the peak value in 2021 was $67,000.
So I think this rule has been roughly applicable so far.
From this perspective, if Bitcoin's price reaches or even exceeds $250,000 next year, I think that would clearly be considered a bubble.
From the perspective of crypto-assets, in the past bear and bull markets, we have been very attentive to an indicator: Bitcoin's market dominance, that is, the proportion of Bitcoin's total market capitalization to the entire crypto-asset market capitalization.
At the peak of the 2017 bull market, Bitcoin's market dominance was around 33%; at the peak of the 2021 bull market, Bitcoin's market dominance was around 44%.
So from this perspective, if Bitcoin's price reaches a peak next year, and we assume the above market dominance rule still applies, then Bitcoin's market dominance will probably be between 30% and 50% (greater than 30%, less than 50%).
The above two standards are purely data-driven conclusions.
In addition to this, I think personal experience and intuition are also very important reference indicators.
Generally speaking, when we clearly see that almost all sectors in the entire ecosystem have rotated, this cycle is probably about to end.
I believe many participants will have this feeling. It's just that at that frenzied moment, our inner greed will deliberately avoid this feeling and deliberately numb ourselves, thinking that the dance will continue and the horse will keep running.
So in summary, the above three standards (two data standards, one intuitive standard) are the line of thinking I use to estimate the reasonable valuation of Bitcoin.
However, this line of thinking has great limitations, because it only estimates the upper limit of Bitcoin's valuation, not the lower limit. So it is very possible that the peak of Bitcoin may not even reach or be far below the upper limit, and the bull market will still collapse.
