Do you believe in BTC "Energy Value Oscillator" theory?

[cheezcarls]

Analysts are constantly striving for effective methods of determining a fair value for Bitcoin. One approach, which suggests Bitcoin is currently undervalued, involves looking at the amount of electrical energy miners commit to the network.

Analyst and asset manager Charles Edwards details the Bitcoin Energy Value model in a recent Medium post.

Source link here

To be honest, I am not a fan of such theories.

Analysts like Charles Edwards can predict all they want, but there's a higher chance that their predictions won't come true. It's just that we have to face the reality.

The reality is that the market is unpredictable, as it can pump or dump in a sudden way. Like what is happening in the crypto market now. A Bitcoin whale dumped his tokens (we suspected that it's from the Plus Token scam) all of a sudden.

Volatility is so high. It is why we should learn how to manage our risks when we start investing in Bitcoin and other cryptocurrencies.

But what would be your reaction to this one guys? Do you honestly believe in Charles Edwards' "Energy Value Oscillator" theory? Hmmm.....

[blckhawk]

As stated in the article, there are several theories that aims to predict the next price action. And there's nothing wrong with that. In the end, we still are the one deciding on our buy/sell orders. And also like you, I don't believe much on these theories. Anything could happen, the market is indeed unpredictable. It might follow the path this week, and suddenly crash the next one or two due to several factors such as market and government sentiments.

[jseverson]

I personally don't. The amount spent on mining Bitcoin doesn't have anything to do with its market value because the market doesn't care about that. Unlike traditional physical goods, manufacturers (miners in this case) don't get to dictate the selling price of their product (Bitcoin), so their production cost doesn't really matter in pricing.

There's bound to be some correlation because miners have to adjust to actually profit. Let's take Litecoin as an example: its price should have skyrocketed after its halving because it costed significantly more to mine, but miners turned off their machines instead because they have to follow the market, not the other way around.

[avikz]

Such kind of theories are just an attempt to derive a fair value of an asset. It takes various factors like peoduction cost, peripheral cost or ancillary costs into accout to conclude a value. However, these kind of theories are meant to work in a perfect world. So it is evident that such theories won't work in reality everytime and for every asset, especially the unregulated ones!

In reality, bitcoin/crypto market is not regulated and deep pocket investors can really execute a pump and dump game to make money! So the market is far away from functioning under such theories. The reality is entirely different and way more dynamic that a mere theoey can fathom!

[Kemarit]

We have heard a lot of these so called theories in the past, but at the end of the day, it doesn't work in this market wherein it is based on pure speculation, market manipulation and sentiments. So I don't understand why they have to come up with many theories which doesn't hold ground in this market.

You can't derive a fair asset value that's been traded 365/24x7 and as young as bitcoin market. And to keep it simply, its just supply and demand.

[kotik085]

We have heard a lot of these so called theories in the past, but at the end of the day, it doesn't work in this market wherein it is based on pure speculation, market manipulation and sentiments. So I don't understand why they have to come up with many theories which doesn't hold ground in this market.

You can't derive a fair asset value that's been traded 365/24x7 and as young as bitcoin market. And to keep it simply, its just supply and demand.

The volatility is high bitcoin. Bitcoin can fall in price today so that a trader buys at a low price, so it can rise in price in order to sell, higher than it bought. These are the distinguishing features of Bitcoin from other brands and brands.

[Tonteus]

I believe that the price of bitcoin is impossible to predict and that the market is not controlled in full.

[Ucy]

I guess he is talking about Bitcoin price increase/decrease not corresponding to the amount of energy used by miners. There are strong reasons why this is so.
Unfortunately I couldn't read the article properly to understand what he is talking about.
You can't blame him too much. He probably found convincing patterns that support his theory

[NextDoor125]

We can not know our future, we just have inference from the previous incident, From what I know so far, it seems Bitcoin will take a strong place and bring hope to users.

[Artemis3]

I personally don't. The amount spent on mining Bitcoin doesn't have anything to do with its market value because the market doesn't care about that. Unlike traditional physical goods, manufacturers (miners in this case) don't get to dictate the selling price of their product (Bitcoin), so their production cost doesn't really matter in pricing.

There's bound to be some correlation because miners have to adjust to actually profit. Let's take Litecoin as an example: its price should have skyrocketed after its halving because it costed significantly more to mine, but miners turned off their machines instead because they have to follow the market, not the other way around.

And this is exactly what is going to happen to Bitcoin. Litecoin just did it faster, because faster blocks etc. Most of the coins have already been produced, 18M/21M. What is left is only going to take longer even more as time passes. Bitcoin production is definitely not going to affect prices to the point mining remains profitable, and besides bitcoin production was pre-defined since the beginning, no matter how many miners are out there or if its profitable to mine or not.

Indeed miners cannot suddenly change production at least not too long, as every two weeks it self adjusts. Normally changes in global hashrate are smooth enough that the time it takes to self adjust doesn't make things too different while it does so. With physical things such as oil, the producers can in fact arbitrarily change production to affect prices, as Opec has done for decades. But oil gets consumed when used, bitcoin simply changes hands, its normally NOT consumed, a bit like gold...

If you paid attention you would have noticed this has been going on after each halving already. It appeared to slowdown somewhat by bitcoin market price increase and improved efficiency of asics, but even with that its not enough to keep it profitable overtime; it is an uphill mountain where the grade only keeps increasing every 4 years until almost no one can keep climbing anymore.

As expected, mining has gradually been less and less profitable and this start removing the older inefficient ones first, those with expensive electricity, until the most efficient asics in the cheapest country (here) is no longer profitable. Those that made money mining would be wise to have diversified their investment in different avenues by now, do not expect to continue the game much longer, especially the bigger ones running near the borderline of profitability.

[hugeblack]

The real effect on supply and demand varies in many reasons. Mining is one of them, but it does not affect the way many people think of its effect on the production of more currencies and thus the direct impact on supply and demand.

Mining affects two reasons, one of which is, the production of more currencies "that have no effect" and its effect on confirming transactions "will affect many economic dimensions and slow down transactions."

In short: The effect is direct in terms of supply and demand, but it will not change the price substantially. Indirectly, it can slow down transactions and thus may reduce the price dramatically.