What is "Fair" Value For Bitcoin? Here's What We Know. (BNC)
Hi friends! I was just thinking about fair market value, and I decided to take a different look at BTC. When it comes to the purpose of the global marketplace, I believe that the market's primary job (other than providing a means of buying and selling securities) is to always determine fair market value. The market price of securities will always vary (sometimes dramatically) above or below what is the true "fair market value." However, market participants will ALWAYS eventually force the price of securities back to the fair market value.
With that in mind, how can we possibly KNOW what fair market value really is? That is a question that is nearly impossible to answer, unless you're able to look at balance sheets, earnings reports, EPS numbers and so forth. For cryptocurrencies, none of that information exists. The only thing we can rely on is price. What are people willing to pay for this stuff? In order to know that, for Bitcoin, we can simply look at the average price for the entire history of BTC. As you can see, here on the BNC Bitcoin chart, there are 3,058 daily bars of data. So, I threw up a 3,056 day moving average, in order to find the average price of BTC. As you can see, there is a tiny pink line, right at the $1530 level. That is what investors have been willing to pay, on average, for the entire history of BTC. Interestingly, that number is pretty close to the $1177 number that I proclaimed is the primary downside target, if/when the $3000 level falls. Since price can overshoot "fair," or in this case "average" market value, it isn't outrageous to think that price could fall slightly below $1530, toward $1175ish. Knowing that there is major support there (red trendline) and knowing that it's right around the average price of what investors have been willing to pay, if I had to estimate where a floor could be, I would say it is likely to be right around there. However, it's always best to let the market show you where the floor will be.
In other words, we have been WAY above what investors have been willing to pay, on average, for Bitcoin. Now, it appears as though the market is doing it's job, and BTC is returning to the pink average, which could be seen as an estimate of "fair market value." Obviously, as price continues to fall, so too will the average price of BTC. I just think that somewhere around the $1500-$1175 area, the bulls could see enough "fair value," to defend prices at those levels.
On a side note, "fair market value" is constantly evolving, based on fundamentals and market sentiment. In the case of BTC, the average value will also continue to evolve, possibly dramatically higher or lower. Regardless, we are closing the gap between price, and what investors have been willing to pay on average.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
With that in mind, how can we possibly KNOW what fair market value really is? That is a question that is nearly impossible to answer, unless you're able to look at balance sheets, earnings reports, EPS numbers and so forth. For cryptocurrencies, none of that information exists. The only thing we can rely on is price. What are people willing to pay for this stuff? In order to know that, for Bitcoin, we can simply look at the average price for the entire history of BTC. As you can see, here on the BNC Bitcoin chart, there are 3,058 daily bars of data. So, I threw up a 3,056 day moving average, in order to find the average price of BTC. As you can see, there is a tiny pink line, right at the $1530 level. That is what investors have been willing to pay, on average, for the entire history of BTC. Interestingly, that number is pretty close to the $1177 number that I proclaimed is the primary downside target, if/when the $3000 level falls. Since price can overshoot "fair," or in this case "average" market value, it isn't outrageous to think that price could fall slightly below $1530, toward $1175ish. Knowing that there is major support there (red trendline) and knowing that it's right around the average price of what investors have been willing to pay, if I had to estimate where a floor could be, I would say it is likely to be right around there. However, it's always best to let the market show you where the floor will be.
In other words, we have been WAY above what investors have been willing to pay, on average, for Bitcoin. Now, it appears as though the market is doing it's job, and BTC is returning to the pink average, which could be seen as an estimate of "fair market value." Obviously, as price continues to fall, so too will the average price of BTC. I just think that somewhere around the $1500-$1175 area, the bulls could see enough "fair value," to defend prices at those levels.
On a side note, "fair market value" is constantly evolving, based on fundamentals and market sentiment. In the case of BTC, the average value will also continue to evolve, possibly dramatically higher or lower. Regardless, we are closing the gap between price, and what investors have been willing to pay on average.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
Comment:
It's clear that many of the readers are somehow misunderstanding my writing. Never did I say that the current average price of $1530 represented "fair market value." Instead, I specified in the article, that (unlike other securities) it is practically impossible to estimate the fair market value of cryptocurrencies. I simply used all of the data on the chart, to determine the average price that investors have been willing to pay over time, absent the volume of people willing to pay those prices. Admittedly, the average is a bit skewed, since it doesn't account for volume, but it is in the general ballpark. That number roughly correlates to the major support at $1175, which I have noted as a downside target (should 3000 fall) in prior analyses. That is what I found so interesting, and that is why I believe that the bulls are likely to defend the market at those prices.