Bitcoin trading volume hits a new high, but the price has not reached a new high. Is it undervalued?

At the beginning of 2019, Bitcoin started a bull market after a year-long bear market. As of the time of writing, it has stabilized at $9,000 from a low of $3,000. Through Coinmaketcap data, we can intuitively feel that the current trading volume of Bitcoin has exceeded the trading volume when Bitcoin reached its highest price of $20,000 at the end of 2017. The trading volume has reached a new high, but the price has not reached a new high. Is the value of Bitcoin underestimated?

We can probably feel that in 2017, cryptocurrencies such as Bitcoin experienced explosive growth in a short period of time, especially when Ethereum officially launched the 1CO period. Various altcoins skyrocketed dozens of times in a short period of time. Because they used Ethereum crowdfunding, they themselves also exploded with amazing power. You must know that at that time, the market value of Ethereum was gradually approaching the market value of Bitcoin. Some people in the market even believed that Ethereum would surpass Bitcoin. Currently, it is only 1/6 of the market value of Bitcoin.

In fact, the cryptocurrency market boom in 2017 was a false prosperity, as the market over-expected the disruptive effect of the cryptocurrency market and blockchain on the traditional market. With the launch of the mainnets of the major public chains that were popular in the early stage, their applications did not show obvious results. Therefore, in 2018, the entire market was in the process of de-bubbling. Even Bitcoin fell from a high of 20,000 US dollars to around 3,000 US dollars, a drop of more than 80%, and other currencies basically fell by more than 90%.

(Image from Reddit forum)

After a whole year of bubble digestion, in 2019, the market for cryptocurrencies such as Bitcoin began to pick up. This was at a time of global trade frictions and an unstable financial environment, which kept the market warm and attracted the attention of major financial institutions, especially Facebook, JPMorgan Chase, New York Stock Exchange, Nasdaq and Fidelity Group. These institutions occupy an unparalleled position in the United States and even the world.

At the same time, these institutions are also attracting a large number of users to participate in the cryptocurrency market. As we can see, the current trading volume of Bitcoin has exceeded the trading volume when Bitcoin reached its highest price of $20,000 at the end of 2017. The trading volume has reached a new high, but the price has not reached a new high. Is the value underestimated? Let's make a conclusion first. It may be.

First, the market is becoming more mature. A market with sharp rises and falls must be a manifestation of an immature market, which is mainly reflected in market manipulation. This means that a large number of Bitcoins were previously concentrated in the hands of a few people, which led to the bias of a few people being able to forcibly reverse the direction of the market. After a year of bubble precipitation, more Bitcoins are scattered among different groups of people, which makes the emotional bias more and more balanced. This is also a concentrated manifestation of full market competition. Full competition makes price performance closer to value, and deviation from value will move closer to the real value range, and the market will become more mature.

Second: The depth of transaction is re-precipitated. Time is used to weaken the spatial difference in exchange for a higher trading depth. We can call this process the process of bottoming out or top-building, in order to accumulate strength and then burst out. Judging from the current market fundamentals and mainstream trends, this is a bottoming process, and it will probably wait until before the Bitcoin halving in 2020 to release its pent-up power.

Third: The stock market is accumulating again. First, from the perspective of the mining market that maintains the security of Bitcoin, the total network computing power of Bitcoin continues to reach a historical high, which means that more people have joined the Bitcoin mining market. The mining market mainly includes manpower, electricity, mining machine chips, etc.; of course, more users are pouring into the market. Whether from the Baidu Index or the Google Index, it has shown that the number of users has continued to grow in the past six months... The stock market has been accumulating and has not yet ushered in an explosion.

To sum up, we can probably conclude that the current value of Bitcoin may be underestimated, but it is not anchored to any valuable assets and still has high risks. We still need to pay attention to it because no one knows which will come first, tomorrow or tomorrow. If you don’t have faith in the world currency, it is better not to participate in this market.

Author: Lai Daojun

Source: Laidao Blockchain