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1  Economy / Speculation / What’s your favorite crypto worth? on: June 05, 2017, 03:36:08 PM

Have you ever gone about trying to figure out what your favorite cryptocurrency is really worth? You know, the Bitcoin is worth X, and Ethereum is worth Y, so my crypto must be worth Z exercise? My hopes are that this thread will help us all with that simple, yet not so simple, task. You know what they say, two heads are better than one!

I suggest that the fundamental starting point is determining a relative “peg” to what almost all crypto is traded in (for all intents and purposes), that is to say, Bitcoin itself. For example, on the most rudimentary of levels, if your favorite coin has an eventual cap of say 84 million coins, like Litecoin for example, then you would simply divide the eventual number of Bitcoin by the eventual number of Litecoin, or 21 million by 84 million, respectively, and you’d have your valuation estimate of Litecoin relative to Bitcoin in 25,000,000 Satoshi.

The fact that almost all altcoin trading is done in Bitcoin is only one reason for using it as a relative base number. It is also a mature cryptocurrency with mature markets with hundreds of millions of daily trading volume and billions in capitalization. The free market is clearly setting reliable daily prices that not only serve to value Bitcoin, but also as a solid reference point for alts.

With this kind of a relative assessment basic reference point we can begin to get a bit more objective with our estimates of value that we give our favorite cryptos. Of course, this “objectivity” ends with the basic ratio adjusted valuation itself, and, just as one would expect from such simplicity, there is no explanation for why something is overvalued or undervalued, but at least we’ve got a starting point to begin that discussion.

Overvalued and undervalued should not be confused with overbought and oversold – they are very different constructs with the first belonging to the fundamental analysis of the object being traded and the second belonging to technical analysis of the actions of market participants. When we ask the question why something is undervalued (which will be the key question for us at this time since there still are no examples of truly overvalued with respect to ratio pegged fair value) we are immediately concerned with product and product perception, and management, which in this case we generally call Development Teams.

If the product itself is based on newer, less well known, perhaps even experimental technology, then there would be an obvious reason for why the crypto in question would trade at a discount to fair value, or, as it were, be considered to be undervalued. We might even refer to this as a risk premium and expect a similar crypto based on Bitcoin core technology, all other things being equal, to trade relatively higher.

Another of the key considerations is the Dev Team behind the project. Obviously, a single developer “team” would trade at a notable discount. Take two equally designed coins and put a team of known experts alongside a “team” made up of one anonymous dev, and simple common sense tells us that there ought to be a huge difference in the value of the crypto being considered.

Then there is the issue of delivery, or performance, as it were. This is management related - after, of course, we’ve determined there is a real team at the helm with the minimum prerequisite competence. Is the team constantly improving the product and are issues dealt with in a timely and acceptable manner? Are deadlines met? Or is there overpromising with a lack of real results? Or, worse yet, are there unsatisfactory results in the form of partially working products or even complete failures? Product delivery, when lacking or nonexistent, can be a major reason for undervaluation, just as the opposite is true when great products are delivered as promised like Apple has become accustomed to doing.

Ideas are also critical, but the main idea is already there - it’s called blockchain. As such, we’re really not dealing with new ideas that can cause premium or discount trading, but there are sub-categories of ideas, or niches as I refer to them, that everyone is scrambling for. I’m not sure how much any given niche idea itself can influence in actual valuations – this is more of a delivery issue in my thinking as anyone can shoot for any particular market and it’s the first to get there that will capitalize type of scenario – but it’s certainly something to be aware of and to try and keep in appropriate context within this discussion. Who is delivering best in each target niche?

What about things that taint the image of a particular crypto? Scams? Inexplicable instamines and/or premines? Any shady dealings what-so-ever are most certainly going to cause something to be undervalued, at least long term anyway once the wool is no longer pulled over people’s eyes (it often takes a very unforgiving market to teach market participants that lesson). This is also management related: is the dev team trustworthy?

These are all good questions to be asked when speculating about what our favorite crypto might one day be worth, and to also help keep us from selling way too soon. When putting your favorites to this “stress test”, how do they come out? With shining marks? Is your favorite coin a “5 star” coin but severely undervalued? Or have you found that you are involved in something a bit more suspect? I think the standard advice for the latter is the easiest: get out while you can. However, advice on what you should do with your theoretical outperformers that are currently underperforming is more complicated.

I believe that first and foremost you should share your conclusions – rationally presented objective data based conclusions – with everyone you can. You will be doing everyone involved a huge favor as the better everyone understands the prospects, the less everyone will sell, and, as logic would have it, price, in turn will continue to rise in direct relation to everyone’s knowledge and trend towards fair value.

A slightly more delicate additional action to employ would be that of informing others involved in possible scams about the competition that is doing things right, but you need a strong stomach and real dedication for that. Nonetheless, in spite of the perceived negatives, the person that does this effectively is doing us all a great public service.

Finally, as we move forward educating ourselves and fellow “community” members and others outside our current circles about the real possibilities our favorite cryptos have, let us do so in the positive – there’s nothing that will hurt you more than the internet pissing match the shameful con man will try to lure you into. Take the high road and don’t even go there. Think of it as a word to the wise, and rest assured, the wise will hear you. (To that end this thread will also be a moderated thread with negativity zero.)

With determination, persistence, perseverance and resolve, let the world know about your cryptocurrency’s real prospects! And don’t forget to calmly, yet enthusiastically, TELL THEM WHY! If you’re a real early adopter and not a scammer, you deserve all the rewards you will receive!

And be sure to share it here! OMG, and if you forgot to do that, then where would we be?!?!  Cheesy
2  Economy / Trading Discussion / Turn $10,000 into 1 Million on: May 27, 2017, 02:23:26 PM
Perhaps not exactly "trading", but it just might be one of the shortest time frame investments you'll ever make.  Wink

How about a portfolio competition?

Using today’s price to establish opening position cost basis, the following portfolio has a minimum target of $100,000 (if everything goes wrong) and a maximum (still conservative) target of $1,000,000. (Explaining the reasons why goes beyond the scope of this friendly competition.)

Litecoin (LTC) – 50%
BitShares (BTS) – 10%
STEEM (STEEM) – 10%
Syscoin (SYS) – 10%
Nxt (NXT) – 10%
PIVX (PIVX) – 5%
NEM (XEM) – 5%

We’ll see how it does. Wish me luck!


Full Disclosure: I currently hold many of these issues as “long term” investments (but not all at this exact time since I’m still looking for a better entry on one in particular), and could purchase or sell any, at any time, and/or trade short term as well, with the weighting for this “model” portfolio being somewhat different from my own, where, for example, I am currently overweight LTC, BTS and PIVX.


https://i.imgur.com/MqTGARn.png


Edit: Forgot one very small detail at the time: the price of Bitcoin. It's highlighted on the 5 min chart below.


https://i.imgur.com/00lZU8s.jpg
3  Economy / Economics / Is the Era of P&D Over for Crypto 'Blue Chips'? on: May 20, 2017, 08:50:09 AM

Can we say goodbye to Pump and Dump? Has the era of ratio adjusted valuations finally arrived?

I first commented on what I identified as the first major influx of fiat capital flow into crypto over a year ago. https://bitcointalk.org/index.php?topic=1095434.0

Now a year later, others are starting to get wise too.

http://www.coindesk.com/second-wave-bitcoin-price-growth-may-just-beginning/ (The author’s referring to the 2nd wave *up*, or the 3rd wave in Elliott Wave terminology.)
http://www.coindesk.com/800-growth-q1s-top-performing-cryptocurrencies-posted-big-gains/
http://www.altcointoday.com/billionaire-investor-holds-10-percent-of-life-savings-in-bitcoin-and-ethereum/
https://cointelegraph.com/news/japanese-investors-might-be-fueling-the-next-altcoin-bubble (Take note that P&D legacy influences the author’s title and conclusion – preconceived notions will get you your head handed to you.)

And the articles are becoming more and more proliferate every day.

If you accept the thesis that this “new” money knows basically nothing about the technology itself and only knows that some small part of its portfolio needs to be allocated to this emerging economic reality, and if one of the pillars of modern investing is diversification, then we can conclude that this new money will be spread out over a “basket” of cryptocurrencies. By no means can we even begin to think that non-tech money will target specific cryptocoins. This new money will most likely be targeted at the sector as a whole.

And how will valuation be analyzed and estimated? It will be done just like it’s always been done: by ratio adjustment. If BTC is worth “a” and XYZ coin has a supply 10 times greater, then XYZ will be worth “a” * 0.1. Very simple. Extremely simple. Ultimately BTC will be tied to the USD in the same way, just like all currencies are tied to each other. Of course, there are fluctuations in their relative pricings based on wider economic factors, but just as we never see a 10% overnight change in the EUR/USD, soon we’ll never see huge pumps and dumps again.

I think we’re going to see huge pumps that DON’T dump, and that take prices up to their corresponding valuation levels.

Will we see that in all coins? Take a look at this and answer the question yourself: http://coinmarketcap.com/all/views/all/

If your answer is no, then I agree with you 100%. There are tons of shit coins, tons of abandoned coins, tons of scam coins, etc., etc., that will die in the waste bin of crypto history.

Will the rest all go up at the same time, or more or less “in sync”? My analysis says they won’t. These things begin slowly, gain traction, and then go full steam. It’s not necessarily an overnight phenomenon, that is until you get to the Elliott wave 3, which I believe we are entering, but even then it’s a “process”. The whales get wise and stop dumping once they realize the ride is going to be longer and higher. Their resources are also limited (especially in comparison with the huge amounts of ever growing fiat coming into crypto) and they need to be selective and thus drive the prices of a limited number of “early winners”. Their selectivity in turn is seen by the new fiat coming in who fill their “baskets” with the outperforming names. It’s very circular and perhaps even somewhat self-fulfilling. As the “old timers”, the whales as we better know them, sell to the new fiat at much higher prices, they then “rotate” into lesser known cryptocoins, drive their prices higher, and sell once again to the new fiat that keeps coming in. Rinse and repeat until, at some point, there are no more viable candidates left to “invest” in and all the winners are "fairly" priced. Has this process begun already. Will your coin be included in the winning groups? And which group will it be in? The first to rise? The second? Or will it ever make it at all?

Total market cap is still less than 10 percent of Apple’s market cap. That’s just Apple, and just to name a very famous case that is often cited when making relative comparisons of public companies. Now, put Apple into the relative context of a 13 trillion dollar M2 money stock just in the US (more than 50 trillion developed economies combined money stock), and it’s just a drop in the ocean.
https://fred.stlouisfed.org/series/M2
https://en.wikipedia.org/wiki/Money_supply

This writing is not definitive, nor is it meant to be anything more than food for thought and something to create lively conversation on the subject where more data, opinions and perspectives are added to the mix. I "invested" less than 45 minutes in this, so please forgive the lack of footnotes and exhaustive argumentation. The idea is to start a conversation that I hope you will engage in and enjoy yourself while doing so (and perhaps even make a little more money too!).

For the perhaps 50 or so coins that really are viable, I think we can say goodbye to P&D and hello to real ratio adjusted valuations.

What do you think?
4  Alternate cryptocurrencies / Altcoin Discussion / Is your Alt moving with or against BTC? on: May 09, 2016, 01:42:02 PM
5  Economy / Economics / Massive Program Buy in Crypto Last Week? (15 June 2015) Start of Something Big? on: June 21, 2015, 07:50:50 AM
Did an across the board institutional buy program hit the cryptocurrencies last week?

We certainly saw across the board buying in the first few days of the week of June 15 and there’s absolutely no arguing the point that this involved many millions of dollars worth of buy orders.


Was it institutional, or just a(some) major investor(s)? Or, perhaps just a general change in marketplace psychology that just happened to happen all together at the same time?

http://cointelegraph.com/news/114562/bitcoin-price-analysis-the-50-day-ema-is-a-brick-wall
http://cointelegraph.com/news/114583/price-alert-bitcoin-price-shoots-past-50-100-day-emas-a-trend-change

I’m inclined to think that that these charts are showing signs of “big players” and “smart money” coming into the cryptocurrencies. In my opinion, that was just too much general buying pressure for it to be anything else.

http://www.trading-analytics.info/2015/06/bitcoins-greece-bad-well-cryptocurrency.html

https://bullbearanalytics.com/2015/06/18/bitcoin-alive-undead/


IMPORTANT NOTE: Coin Market Cap’s charts are not equally percentage adjusted, meaning that a 1% move on one chart ultimately looks exactly like a 100% move on another (they might be better viewed as “stochastic” moves rather than price, but they all do clearly show major buying interest across the board early last week).
6  Alternate cryptocurrencies / Altcoin Discussion / It's as Simple as Supply and Demand on: April 04, 2014, 09:49:58 AM
When there is an excess of supply of an artificially cheap product in the marketplace relative to demand, price falls, it's as simple as that. The ASIC vs GPU/CPU issue turns precisely on that very premise.

Admittedly, scrypt ASIC proponents argue that their main justification for ASIC miners is so they can optimize the mining of the most profitable coin at the moment, and then sell it ASAP in order to buy a more established coin like LTC or BTC. I don't think anyone will argue this point: scrypt ASIC exists to mine the "currently most profitable" coins at the lowest cost in order to immediately dump them in favor of the more established coins, or even USD.

What does that do to the less established, "currently most profitable" coin from a supply and demand standpoint? It doesn't take a rocket scientist to answer that question. Price is obviously negatively affected to the downside. In a word, the fledgling coin is CRUSHED by ASIC, whereas, in the absence of ASIC, the newer coin has an equal chance of gaining acceptance, theoretically even equality of status at some future date, as price rises in correlation to the rise in mining difficulty.

In theory, and in practice, on a level playing field, price rises in correlation to the rise in the difficulty to mine - that is what the concept of scarcity is based on. If all coins were always "easy to mine" (as the ASIC proponents meme "should be the case" goes), they would be worthless. Again, supply and demand, and it doesn't take a rocket scientist.

ASIC also centralizes mining and ownership, the exact opposite of the cryptocurrency ethic. Not only will ASIC eventually crush all the "lesser" coins by keeping their prices artificially low and driving the majority of small, ordinary users to some other alternative, the logic behind ASIC will eventually devour (if allowed) even the more established coins that their devotees covet, as they also centralize control in those coins while driving away the average Joe even from those coins as well. The end result would be a few individuals and organizations holding massive quantities of coins with only each other to sell to (i.e. worthless coins in the long run as well).

The coin that will survive is the coin that stays loyal to the cryptocurrency ethic, honoring the principles of wide user base decentralization and a secure network. It doesn't necessarily matter whether it's n-scrypt, or 6+hash, or something else that will come along later, what matters is the community's commitment to combat anything and everything that doesn't foster a decentralized and secure network that is as broadly based and widely accepted as possible (I don't think anyone would argue with that either. Wink ). If the commitment is there, the necessary changes will always be implemented when needed (using the technology currently available at the time . . . which is always advancing as well).

The cryptocurrency that is true to its design will eventually become more and more difficult to mine. That's life, and that's how they're designed! Price logically follows and rises accordingly given that supply falls as demand rises. That, of course, keeps miners in the game, even when it's to the stage of only "inflationary" coins, and the coin, the network, and users alike (and their savings), stay alive and healthy. ASIC is the alt-coin cancer that destroys all that, the gang of termites that eat the foundation out from underneath the house. That "cancer" can be beaten by simply deciding on, and committing to, who we're serving and how we're going about it, and I think that it all probably neatly starts with the answer we give to the following question: who makes up that widely distributed user base and secure network, what technologies do the majority of those end users have at their disposal, and, when it's all said and done, do we really want to make a cryptocurrency that best serves their interests, or not?

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