Can Bitcoin's True Value Be Zero?

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by By Avi Gilburt, ElliottWaveTrader.net

The perspective that most have about Bitcoin ranges from complete lack of knowledge to utter certainty that it will change the world.  Moreover, there are really no true “fundamentals” with which analysts are able to even attempt to value it based upon traditional methods.  But, that certainly has not stopped everyone and their mother from providing their opinion based upon their “feelings.”

Yes, most of what you see presented on the valuation of Bitcoin is nothing more than the analysts’ “feelings.”  In fact, I read an article a few days ago which provided the perfect example of this phenomena seen in the crypto-currency market.  In a recent article, Geoffrey Caveney provided us his “feelings” about Bitcoin:

“When I say there's a "good chance" the bitcoin price will be below $1,000 by next year, I understand that "good chance" is not a precise phrase. Here is a more complete explanation of what I mean, in two paragraphs that will not fit in a headline:

If we had a guessing game, and we had to guess "What will be the lowest price range bitcoin trades at during the rest of 2018 and all of 2019?", my guess would be around "$900 to $1,000." I think it's about 50-50 whether the actual low price will be above that or below that.”

So, it seems analysis about Bitcoin has now come to the point of simply “guessing,” and attempting to package it as analysis.

However, I have to note that the most accurate statement I read in that article was not by the author, but by one of the commenters:

“Bitcoin has value because we say it does. A shiny yellow piece of rock in the ground has value because we say it does. MONEY has value because we say it does.”

The operable statement in this paragraph is ‘because we say it does’. This is why we say that market sentiment, which is clearly not rational, drives stock and market prices much more than fundamentals do.  In fact, market sentiment drives fundamentals as well, and I have outlined that causation chain in this prior article.

John Maynard Keynes recognized that emotion drives the market more than rationality or fundamentals when he famously stated that “the market can remain irrational longer than you can remain solvent’.

So, when you want to understand price, you need to understand market sentiment as being preeminent over any means of valuation, and especially over “guessing.”

Ryan Wilday, (who wrote this article with me) is a man who has lived and worked in Silicon Valley for many years, and sees ‘value’ in cryptocurrency. But he doesn’t bet on or “guess” its ‘value.’  Rather, he analyzes market sentiment when he wants to identify price direction and turning points.

The transparent inflation rates, versus the fed’s hidden printing press and the protection of one’s assets from the ‘banking machine,’ are some of the common ‘reasons’ many buy bitcoin and assign it value. Ryan agrees in these as principles, But it doesn’t tells us how to value Bitcoin, as these principles are too subjective. They may spark warm and fuzzy feelings about Bitcoin, but they don’t tell us when to buy or when to sell.

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[Indrail Ausra]

The crypto market is highly volatile. So, it will be difficult to predict if the price will become stable soon, regardless of the calculation. Only time can tell the tale.