CEO of the New York-based research company Fundstrat Global Advisors Tom Lee is known for making predictions, and throughout all of 2018 he was wrong every single time. He swore he wouldn't make any more into the future, so while his latest TV appearance didn't have him predict $25,000 BTC by the end of the month, he did still make a bullish statement regarding Bitcoin's price.
His claim - Bitcoin's fair value is around $14,000!
The historical data actually does back him up on this.
What is fair value?
The term may be new to some as it's rarely used in the cryptocurrency market. The quick version is, there's "market value" which is whatever something is actually being sold for, then "fair value" which is a price that an educated buyer and seller could agree something is actually worth.
Let's say stock for "Company X" is trading at $50 a share, but they've just released a hot new product and you know it's selling well. Until the next earnings report comes out, that won't fully reflect in the stock price. Since you're confident the stock will rise to $60, then to you, that's it's fair value.
Determining Bitcoin's fair value:
Lee says his company's research looked at how 2 factors typically effect Bitcoin's price, saying:
"If you were to take a combination of active addresses and activity per user, that’s explained over 90% of Bitcoin since 2013. The fair value for Bitcoin, right now, is $14,000"
The short version of what he's saying is - last time there were this many people using Bitcoin at this frequency - it was worth $14,000.
But a bear market is a bear market - and the market doesn't need a better reason to explain Bitcoin being so undervalued.
“(Cryptocurrency) generally trades two or two and a half times its break-even, during a bear market however, the cryptocurrency trades below the break-even." says Lee.
Conclusion: We're holding ourselves back.
If Bitcoin hit $14,000 now, we would still see a lot of people basically saying 'I don't trust this' - while last time we hit $14,000 you were more likely to see people saying $20,000 was next.
Every time Bitcoin has even a small rally, head on over to any popular cryptocurrency community online, and watch how many people are still unable to hear the price went up, without immediately fearing it will come back down.
They even go out of their way to spread that fear - it makes you wonder if what starts out as nothing more than people posting their paranoia actually triggers a sell off, then it becomes reality.
Either way, that mentality reflects in the price. We're still traumatized from the crash of early 2018 and I guess that's not unreasonable.
The good news is that every rally like the one we had this week brings back a little more faith among traders, until eventually we cross a tipping point when the majority believes the rough patch is over. That's when we hit a combination of people holding what they own, and acquiring more. Less being sold, more people buying - you got yourself a bull market.
Once most of us agree we're in for a big, lasting bull run - we'll get one.
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Author: Oliver Redding
Seattle News Desk
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