Is the current price of Bitcoin high or low?

Generally speaking, the major asset classes that can be invested in are divided into two categories:

Production assets that can generate their own cash flow;

Commodity assets that cannot generate cash flow on their own.

Obviously, Bitcoin is different from stocks, real estate, bonds, etc. It is not a production asset, but a commodity asset similar to gold.

The valuation of production assets mainly depends on the cash flow they generate currently or in the future, but for commodity assets, almost every type of commodity has its own unique supply and demand valuation logic.

In the article "What should I buy in 2024 " published the day before yesterday, I used the stock / flow scarcity valuation idea to establish a logical model of fair price for the price of Bitcoin - of course, all models are a reflection of historical data, but at least, judging from the fluctuation history of Bitcoin prices in the past 10 years, this set of models and logic is in line with reality.

(Note: This article has been deleted. I will reorganize the purely theoretical discussion content and publish it again in the next two days).

So, to determine whether the price of Bitcoin is high or low, I follow three steps:

First, you need to understand the price logic of Bitcoin;

Second, judge the macro-financial environment, which may determine the so-called "bull market" or "bear market";

Third, the current short-term market sentiment.

Without considering the macro-financial environment or market sentiment, from the perspective of the Bitcoin price logic model, we can directly use the actual price / fair price of Bitcoin to characterize whether the current Bitcoin price is overvalued or undervalued.

In the past 10 years, there have been four stages where the actual price/model fair price of Bitcoin was lower than 80% (the green shaded area in the figure):

From January 2015 to May 2016, the price of the currency fluctuated between 200 and 400 US dollars;

From September 2016 to July 2017, the price of the currency fluctuated between 600 and 1,600 US dollars;

From December 2018 to March 2019, the price of the currency fluctuated between 3,500 and 5,000 US dollars;

From June 2022 to October 2023, the price of the currency fluctuated between US$ 15,000 and US$26,000.

Among them, the lowest points occurred in September-October 2015 and November-December 2022 , when the actual price/fair price ratio was only about 40%.

In the comments on yesterday’s article, someone questioned me why I didn’t recommend Bitcoin to everyone when the price was the lowest, but now that the price has gone up, I’m writing an article about it. Isn’t this misleading everyone?

I don’t know if these people read my articles often——

People who read a lot of my articles probably won't say such ignorant words. Many times when I wrote articles to be bullish on a certain type of asset, it was definitely not when the price of that asset was at its high point. In this regard, no matter whether it was A- shares, US stocks, Hong Kong stocks, gold, Bitcoin or even crude oil, I have never been bullish at extremely high levels or bearish at extremely low levels.

In fact, in November and December 2022 , I continuously sorted out the serial bankruptcies of financial institutions in the cryptocurrency circle and wrote 6 articles to explain why the price of the currency fell so drastically at that time, and in early January 2023 , I clearly told everyone that the price of the currency had reached the bottom:

A wave of bankruptcies in the cryptocurrency industry;

The cryptocurrency world is experiencing a major earthquake;

Deadly Leverage;

The biggest bankruptcy;

Really big trouble;

Only Bitcoin

The question is, did you buy it when I was recommending it? Do you still think I was cheating you?

Of course, I know that at that time someone must have bought it based on my judgment. At that time, the price of the currency was below 20,000 US dollars. Now they have made money. Will they tell you?

According to my latest simulated S/F model, the current fair price of the coin is about 41,000 US dollars. So, you can understand that the actual price of the coin at 44,000 US dollars is not low, but it is not overestimated either, and it is still in a suitable range.

Let’s look at the macro-financial environment.

2023 can be said to be the year with the tightest monetary policy of the Federal Reserve in the past 15 years. Even in this case, the annual increase of Bitcoin still reached 140% , which obviously shows that the price of Bitcoin must be quite low at the end of 2022 .

In 2024 , when the Federal Reserve is basically unlikely to tighten or flood the market with money, Bitcoin should theoretically be in a bull market, and its price should be close to that of its fair model, which may be a more appropriate result.

Finally, let’s look at market sentiment.

Since the end of October 2023, a series of Bitcoin ETFs have been approved by the SEC (U.S. Securities and Exchange Commission). Because of the expectation that a large number of buyers will come after the ETF is approved, Bitcoin has continued to soar in the past two months. This market sentiment has continued to spread to this day, and has not subsided until now, and it is still continuing...

Judging from the market sentiment, it is definitely at the boiling point, which means that prices are likely to be at a relatively high level in the short term.

From the perspective of the fair price of the S/F model, Bitcoin is in a reasonable range;

From the perspective of the macro-financial environment, Bitcoin is in a reasonable range;

Judging from market sentiment, Bitcoin is at a sentiment high;

The above three points are my judgment on the current price of Bitcoin.