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‘Extreme Volatility’ Expected as Bitcoin Investors Learn to Value It

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With models ranging from Plan B’s Stock-to-Flow (S2F) to Willy Woo’s Network Value to Transactions (NVT), finding the correct way to value bitcoin (BTC) has proven tricky. But according to Nik Bhatia, Bitcoin advocate and author of Layered Money, there is no single way to go about BTC valuation, only “a multitude of firm roots” that we can explore. 

In a new essay titled Valuing Bitcoin and Diagnosing Its Unprecedented Volatility, Bhatia argues that with all of the different models that are currently used by BTC investors and analysts, “extreme volatility” should not be unexpected at all. In fact, Bhatia says, it “should be the baseline assumption” for the BTC price, given that “nobody knows how it should be valued.”

Bitcoin price and volatility:

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Source: buybitcoinworldwide.com

Further in the essay, Bhatia justified his position that there is no one correct model by pointing out the large differences in price estimates between on-chain analyst Willy Woo’s NVT model, and Plan B’s S2F model, which attempts to value BTC using similar methodology as is often used for gold and silver.

The same difference was also pointed out by PlanB himself in a tweet last week:

With models ranging from Plan B’s Stock-to-Flow (S2F) to Willy Woo’s Network Value to Transactions (NVT), finding the correct way to value bitcoin (BTC) has proven tricky. But according to Nik Bhatia, Bitcoin advocate and author of Layered Money, there is no single way to go about BTC valuation, only “a multitude of firm roots” that we can explore. 

In a new essay titled Valuing Bitcoin and Diagnosing Its Unprecedented Volatility, Bhatia argues that with all of the different models that are currently used by BTC investors and analysts, “extreme volatility” should not be unexpected at all. In fact, Bhatia says, it “should be the baseline assumption” for the BTC price, given that “nobody knows how it should be valued.”

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Bitcoin price and volatility:

Source: buybitcoinworldwide.com

Further in the essay, Bhatia justified his position that there is no one correct model by pointing out the large differences in price estimates between on-chain analyst Willy Woo’s NVT model, and Plan B’s S2F model, which attempts to value BTC using similar methodology as is often used for gold and silver.

The same difference was also pointed out by PlanB himself in a tweet last week:

Commenting on the various BTC valuation models, the popular author wrote:

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“An honest study of bitcoin valuation reveals that its growth stems from a multitude of firm roots. Some of the roots are easier to value with on-chain and hash rate analysis, and others are harder to quantify, like the network effects taking place right now as bitcoin fully captures the world’s attention.”

Further, Bhatia also went into detail on his grand vision for the future of bitcoin:

“I imagine that government currencies will cease to exist in countries without globalized economies, as people conduct online commerce in either BTC or USD-linked stablecoins instead of unstable and non-digital government currencies.” 

He added that he believes that an entire generation, already born, is unlikely to ever have a relationship with a traditional bank. 

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“In these scenarios, bitcoin will emerge as a world reserve currency, knocking on the door of the dollar. How would you value that?”, Bhatia concluded.

And while he remains an optimist on bitcoin’s long-term outlook, the latest Chinese crypto crackdown continues to keep investors on the alert for a potential short-term price reaction.

As recorded by the Whale Alert Twitter account on Sunday, USD 3.1bn in BTC and USD 2.4bn in ethereum (ETH) has already been moved out of exchange wallets belonging to Huobi, an exchange with ties to Mainland China, and over to a larger number of unknown wallet addresses. 

And although this is not necessarily bad news, it shows that the regulatory crackdown has real implications for what happens on-chain. 

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Judging from findings from the on-chain analytics firm Santiment, the crackdown could even have a positive implication, given that bitcoin and crypto holders are forced to move funds off exchanges and instead take personal custody of it. According to the firm, exchange balances of BTC are now at their lowest since May 2019, making it “a solid indication” of less selling pressure for bitcoin.

On the negative side, however, a metric known as the “all exchanges whale ratio” has recently crossed above 0.5, a level one analyst on the on-chain analysis site CryptoQuant said traders should “be careful” around. 

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“We need to make sure price stays above 40K. Price action below 40K could be fast and volatile,” the analyst warned about bitcoin’s short-term price outlook.

At 16:15 UTC, BTC trades at USD 41,842 and is almost unchanged in a day. The price is up by almost 4% in a week, trimming its monthly losses to less than 15%.

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Peter Schiff Names Real Reason Behind Bitcoin Drop

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Popular digital assets critic believes that measures against inflation are the real reason behind the most recent market correction

The famous Bitcoin and crypto critic, Peter Schiff, provided his Twitter subscribers with a potential reason behind one of the largest corrections on the cryptocurrency market this year.

According to Schiff, Bitcoin’s correction was tied directly to the Fed’s action toward risk assets like cryptocurrencies and some stocks. Previously, Jerome Powell hinted that tapering might happen sooner than the market expects.

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In addition to the end of the quantitative easing monetary policy, Powell has stated that the point rate may be increased sooner than was expected due to the inflation’s change of nature, which has become a real threat to the country’s economic safety and stability.

All of the actions that the Fed is currently taking are designed to control inflation, which is currently hitting highs previously observed back in the Depression era.

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High-risk assets like Bitcoin and other digital assets were allegedly considered a store of value for those who wished to protect their funds from increased inflation. Schiff is a widely known critic of cryptocurrencies, and he believes they should not be considered an inflation hedge.

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Whales Suddenly Move $320,000,000 in Bitcoin to a Single Destination – Here’s Where the Crypto Is Headed

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Crypto whales just moved over 5,800 Bitcoin (BTC) worth more than $327 million into a single destination, according to a whale-surveilling platform.

Whale Alert tells its 1.8 million followers in a series of tweets that in the last 24 hours crypto whales are relocating thousands of BTC amid a correction that saw Bitcoin tumble to a new 30-day low of $52,416.

Five of the transactions involved shifted BTC from wallets of unknown origins to popular US-based crypto exchange Coinbase. Meanwhile, one transaction moved a large sum of Bitcoin from global crypto exchange Binance to Coinbase.

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Here’s a summary of the BTC transactions:

While crypto investors tend to be concerned that a massive influx of Bitcoin into the crypto exchanges might indicate downward selling pressure, insights firm Into the Block reports that centralized exchanges recorded more outflows than inflows during the past week.

The crypto intelligence platform says,

“Bitcoin recorded nearly $2 billion in net outflows from centralized exchanges, the highest level in five weeks.”

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At time of writing, BTC is down nearly 7.14% on the day to $52,557.

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Ethereum Price Analysis: ETH drops 25 percent from previous swing high, ready to recover?

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  • Ethereum price analysis is bullish today.
  • ETH/USD rejected further downside at $3,600.
  • Previous support at $3,950 is currently tested as resistance.

Ethereum price analysis is bullish today as we expect further recovery to follow after a strong reaction higher from the $3,600 was seen this morning. Likely ETH/USD is set to break above the current resistance, moving to regain even more over the weekend.

Ethereum Price Analysis: ETH drops 25 percent from previous swing high, ready to recover? 1
Cryptocurrency heat map. Source: Coin360

The market has seen strong bearish momentum over the last 24 hours. The market leader, Bitcoin, has lost 17.23 percent, while Ethereum 14.83 percent. Meanwhile, the rest of the market has seen even more substantial losses.

Ethereum price movement in the last 24 hours: Ethereum breaks below $3,950 previous support, rejects more downside at $3,600

ETH/USD traded in a range of $3,739.39 – $4,647.29, indicating extreme volatility in the market. Trading volume has spiked by 113 percent, totaling $41.2 billion, while the total market cap trades around $465 billion, resulting in the market dominance of 21.16 percent.

ETH/USD 4-hour chart: ETH reacts back to previous lows

On the 4-hour chart, we can see the Ethereum price swiftly rejecting further downside after touching the $3,600 mark this morning.

Ethereum Price Analysis: ETH drops 25 percent from previous swing high, ready to recover?
ETH/USD 4-hour chart. Source: TradingView

Ethereum price action saw strong bullish momentum during the first half of the week. After establishing and retesting the new low at $3,950 last weekend, ETH/USD started to move higher on Monday quickly.

Ethereum reached $4,750 resistance by Wednesday, as bulls were eager to move towards the previous all-time high. However, more upside did not follow, leading to a reversal over the next days.

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Another attempt to test upside was seen Yesterday, with the following rejection leading to a strong spike lower. Overnight, the Ethereum price broke past the previous swing low at $3,950, leading to more downside this morning. Strong reaction, preventing further downside, was seen at $3,600, with ETH/USD since moving back towards the previous low.

Ethereum Price Analysis: Conclusion 

Ethereum price analysis is bullish today as we saw a swift drop to $3,600 met with a strong reaction higher this morning. Therefore, we assume ETH/USD has set a new swing low, and further recovery should follow over the weekend.

While waiting for Ethereum to move further, see our articles on the Best Crypto Wallet 2021, Decred Wallet, and Ripple vs SEC.

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