Remember back when the Gardners’ would write articles about how to value companies and ordinary investors could use that as a blueprint to do it themselves? That ship sailed. TMF doubles down on the policy of destroying their brand by providing objectively crackpot financial advice:
According to the growth-oriented investment firm headed by Cathie Wood, Bitcoin could gain greater acceptance as an asset to be purchased and held by central banks (for 1% of their asset reserves), high-net-worth individuals (for 5% of their wealth), institutional investors (2.5% of assets), and corporations (5% of cash on balance sheets). Plus, it could slowly rise in value to equal 50% of the entire global value of gold. If we consider ARK Invest’s projections based on these factors, the price of a single Bitcoin could exceed $1 million by 2030, versus approximately $16,000 today.
So in a mere eight years Bitcoin could be roughly equal to the GDP of the United States. Umm…how? Ace financial writer Neil Patel explains:
Compared to traditional stocks, which represent actual businesses that produce revenue and cash flow, it’s not exactly easy to do a valuation analysis on Bitcoin. So, to be clear, it’s anyone’s guess as to whether or not Bitcoin can hit this lofty goal by 2030 – or at all.
Oh, it is a guess! I guess that Amazon will be worth a quadrillion dollars in 2030 and Google will be worth $4 quadrillion. Same exact amount of analysis that Neil Patel did which is zero.*
*I’m a bit jealous because he got paid for doing nothing. Good work if you can get it.
You have here an article which lays out the investment case for Bitcoin, clearly articulates why any attempt at valuation is highly uncertain (it’s a commodity, not a source of cash flows), and provides the source (Ark) and logic (quantitative assumptions) for one possible valuation.
Bitcoin has the same value as works of art, whatever you can get at auction. It produces nothing, it can’t be used for anything beyond decoration. But museums still charge to let you see works of art and some people pay for the privilege so there is some value. There is no way to value crypto currencies like one values securities such as stocks and bonds.
Crypto currencies pretend to be money and should be valued as money. How much is a US dollar worth? The Treasury is happy to give you a dollar for a dollar. That’s what a dollar is worth. If you happen to live in a dollar economy you use the dollar as your measuring tape to put a value number on everything else. As far as I know there are no bitcoin based economies just like there are no Van Gogh based economies. Is bitcoin a currency? Doubtful!
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One needs to understand the origins of money. Anyone can create money provided someone else accepts it as money. In Venezuela checks have to be dated with the current date and therefore they cannot create money, they can only transfer ownership of money. In Israel you can post date checks and use them to create money. Say you have 100 shekels in the bank and you give someone a 1000 shekel post dated check to buy something. If accepted you have created 1000 shekels which the bank will honor starting on the check’s date provided you have sufficient shekels in you account. The recipient of the check can endorse it to a third party who can endorse it to a fourth party and on without limit. It’s the bank’s willingness to accept the check that powers the creation of money but it has risks, it will be worthless money if you don’t deposit sufficient shekels in your account by the due date.
Gold money is a delusion! Some of gold’s value is intrinsic – the uses for the metal – but the rest is the willingness of third parties to pay above the metal’s intrinsic value. A great example was Potosi silver, mining lots of the stuff just created inflation in Spain which was exported to the rest of Europe.
Decades ago I asked my very trusted stockbroker what he thought about investing in gold. He was against, not only does gold produce nothing, you have to pay to safeguard it. Cash, of course, is subject to inflation/devaluation so that makes it a poor investment. Real estate seemed to me a safer place for my money until I effectively lost my home in Caracas, it’s still mine but I don’t want to live there and would get very little by selling it. The most liquid appreciating assets are good stocks but also subject to bear markets. The Chinese protested covid lockdowns and worldwide markets fell – the butterfly effect!
As you can see, crypto currency does not even come into consideration but if it did it would rank with money, art, or Ponzi. Having paid more attention to it lately, Bitcoin would seem to be the most trustworthy of the crypto currencies.
Not sure how to interpret your post and sign off.
The above leaves me with a stock portfolio and a cash security fund to weather bear markets. I hope the above explains well enough.
Two guys walking down the road see a pile of dog poop. One says, “hey that looks like dog poop”. Then he bends over and touches it. He says, “feels like dog poop”. The other bends over and sniffs it. Says, “smells like dog poop”. Then he sticks his finger in it and tastes it. He says “tastes like dog poop”. The other one says, “Well, good thing we didn’t step in it!!”
You don’t need to look for anything at all. The key is to become convinced that it will go up and then buy it. That’s because the ONLY WAY this kind of asset can go up is if there are more people wanting to buy it as time passes. The minute fewer people want the asset, the price of that asset will drop.
This, of course, applies to all assets. Stocks go up when there is more demand for that stock, real estate goes up in areas with high demand, etc. BUT, other assets have secondary things that can affect their value - for example, stock in a company can also go up if the company earns more, etherium can’t earn more because it earns nothing. A bond can go up if interest rates go down, etherium pays no interest, so rates don’t [directly] affect it.
What they are building on it. Don’t look at it as a crypto currency, that is a small amount of it and what people who are not delving into it are looking at. It’s the Technology that is being built on the platform that needs to be looked at. I am not saying it needs any of your investment dollars but the technology is interesting.
I think the blockchain technology is indeed interesting. And I think that smart people will come up with ways to use it that can become profitable over time. HOWEVER, I am not sure if etherium is going to be “the winner” or even “a winner”. That’s because:
Too many people still use etherium solely as a speculative endeavor.
Too many people still use etherium as a currency of sorts (to buy and sell stuff like NFTs or other online “stuff”).
Transactions are still relatively expensive. If someone finds a new and novel use for a blockchain, they can simply set up a new blockchain that has the characteristics they want (maybe low cost, maybe low latency, maybe 3rd party control/regulation, etc).
It’s very volatile. For ongoing use of something in the business of transactions, volatility is not usually desired. If something costs ETH 10 one day/hour, it is very disconcerting to suddenly see it at ETH 9 or ETH 11 a day/hour later. Stability is desirable for this type of application. I will admit though, that for applications that are not at all money transaction related, stability of value isn’t a factor because there is no concept of “value”, that’s the case in which the blockchain is used only for security, traceability, and consistency.
Actually Mark, that is only your opinion, most of the people holding Ethereum are not holding it as a coin but as an investment on the underlying technology. The platform is getting to be huge and many different projects are being built upon it so yes it is a bet that Ethereum will be one of the top technologies in the future.
No that is incorrect. Ethereum is now POS and transactions are much, much cheaper.
Stability is desirable but at the start of any new technology it is volatile. Like I said it isn’t the coin that makes it valuable but the underlying technology which you haven’t mentioned at all.
Of course it is! Everything I write here is my opinion! Who else’s opinion could it be???
I know POS is better than POW. Way better. Hence my use of the word “still”. Transactions are indeed still relatively expensive. While GAS is way down since last year (by 80+% which is indeed “much much cheaper”), it is still relatively expensive for most transactions. See chart here - Ethereum Average Gas Price
I suppose that would be true if you ignore the VERY FIRST TWO sentences in my reply!