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Author Topic: Crypto Needs a Rational Value Investing Model  (Read 126 times)
derdemo
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March 10, 2020, 09:47:04 PM
Merited by exstasie (1)
 #1

Hi, guys! There I've found a must-have read by Jeff Dorman:
https://www.coindesk.com/jeff-dorman-value-investing-warren-buffett-crypto

What do you think on the topic?
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March 10, 2020, 10:45:55 PM
Last edit: March 10, 2020, 11:01:11 PM by DooMAD
Merited by cryptoaddictchie (1)
 #2

Sounds like wishful thinking on his part.  Not only in thinking that they're going to change peoples' trading behaviour, but also where he's clearly in denial about the part where what institutional investors do is absolutely 100% still gambling and no amount of analytics will change that.  Some are just safer bets than others.

Crypto has opened the floodgates to people outside of the traditional finance sector.  It's only natural Dorman believes things would be better if they acted more like institutional investors, but they're simply not going to.  Ordinary people are going to treat it like gambling.  Some of them are going to buy into a random coin because they like the sound of its name, or because some bagholder was hyping it up on reddit and sounded vaguely convincing, or whatever other completely irrational impulse they had for buying into it.  The analysts can come up with whatever formula they like, but I suspect the general public are going to keep doing whatever and continue with largely random buying and selling.  

If the analysts need a head start, the groundwork is already laid.  That topic contains all the fundamentals you'll ever need to judge a coin on.

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March 11, 2020, 12:04:44 AM
 #3

Sounds like wishful thinking on his part.  Not only in thinking that they're going to change peoples' trading behaviour, but also where he's clearly in denial about the part where what institutional investors do is absolutely 100% still gambling and no amount of analytics will change that.  Some are just safer bets than others.

Crypto has opened the floodgates to people outside of the traditional finance sector.  It's only natural Dorman believes things would be better if they acted more like institutional investors, but they're simply not going to.  Ordinary people are going to treat it like gambling.  Some of them are going to buy into a random coin because they like the sound of its name, or because some bagholder was hyping it up on reddit and sounded vaguely convincing, or whatever other completely irrational impulse they had for buying into it.  The analysts can come up with whatever formula they like, but I suspect the general public are going to keep doing whatever and continue with largely random buying and selling.  

If the analysts need a head start, the groundwork is already laid.  That topic contains all the fundamentals you'll ever need to judge a coin on.

A bit biased the thread you sent, but so much truth! I agee with you that Jeff Dorman seems obvlivious (intentionally or not) about the fact that all investments are a gamble. I find it interesting how many of my friends have contacted me because "you're the bitcoin guy" and the projects they get offered are so full of crap, ponzi schemes, or easy to dismiss if you're knowledgeable in the area.

That last part isn't entirely related I just think that bitcoin in general has to appeal to the average joe, and we're not quite there yet. But we'll get there in time Smiley
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March 11, 2020, 12:25:41 AM
 #4

People are speculating because it appears to be profitable, so no matter how much you tell them to think fundamentally, it's not going to change, but I think even now doing fundamental analysis is still useful, because it will tell you which coins are likely to do well in a few years. Technical analysis can make all sorts of predictions about a shitcoin like BSV or BCH, but it was always clear from the start that those coins are doomed, because their technology is bad. I would even go as far as to recommend everyone to not hold big amounts of altcoins for long term, cause it's clear that they aren't making much progress.





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March 11, 2020, 05:56:06 AM
 #5

Quote from the article:

Quote
Investing in digital assets is a sham! Participants in this industry are simply trying to anticipate price movements rather than use fundamental analysis to determine why a token or coin might go higher or lower. There is no intrinsic value. It’s pure speculation based on technical analysis. It’s outright gambling.

I completely agree with it! Crypto market has always been a speculator's heaven, but that didn't happen overnight! The volatility of crypto prices has lead the market to this regime and now it's almost impossible to get out of it. But it's not just the volatility, it's also about the lack of fundamentals. That's the reason why old-school investors like Warren Buffet has never find crypto interesting or even worthy of investment. Because cryptos can never have a profit-loss book, it doesn't have accounting to match the real world stock market filling. So how can the fundamentals will come from?

Value investing model is standing on the principles of fundamentals, which decentralized cryptos can never have (I am not talking about XRP here)! It was a speculative asset, it is a speculative asset and it will remain as a speculative asset in future as well! 

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March 11, 2020, 08:24:24 AM
 #6

This quote from the article puts things into perspective:

Quote
Many of the models in existence are unproven, with only a few years’ worth of data to support their methodologies, while other models have likely yet to be conceived.

This is a very nascent market and crypto fundamentals are really opaque and misunderstood. The only coins with simple fundamentals are exchange tokens (BNB, LEO, KCS) that are valued based on company revenue growth. It'll be a long time (if ever) before cryptocurrencies can be valued like blue chip stocks.

Technical analysis can make all sorts of predictions about a shitcoin like BSV or BCH, but it was always clear from the start that those coins are doomed, because their technology is bad. I would even go as far as to recommend everyone to not hold big amounts of altcoins for long term, cause it's clear that they aren't making much progress.

After almost 3 years, BCH is still trading above its launch price and is the #4 coin by market cap. If anything it seems like it will just keep following BTC. If a coin is relevant enough to be alive and kicking during the next bubble, it will pump alongside it.

It's tempting to condemn and write off altcoins generally but history says those that do will miss out on massive gains. Who wants to do that? Huh

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March 11, 2020, 12:14:28 PM
 #7

And what exactly means rational value? Cryptocurrencies value was always defined by the market, how much are investors willing to pay, that is the price.
Crypto market is functioning by very different rules compared to traditional investment markets and thus requires different type of investors but that is not the secret. Don't compare cryptocurrencies market with stock exchange or something similar, you can't implement the same rules and patterns.

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March 11, 2020, 06:26:27 PM
 #8

After almost 3 years, BCH is still trading above its launch price and is the #4 coin by market cap. If anything it seems like it will just keep following BTC. If a coin is relevant enough to be alive and kicking during the next bubble, it will pump alongside it.

It's tempting to condemn and write off altcoins generally but history says those that do will miss out on massive gains. Who wants to do that? Huh

BCH launch price was in range of $250-500, now it trades at $250, which I think is horrible for a cryptocurrency, since it's supposed to grow in the long run. If you switch to BTC price it's even worse, it's clear that BCH or almost any other altcoin performs worse than Bitcoin.
The alt season is the only hope for altcoins to become relevant again, but there's no guarantee that it will come - we had two bullish periods for Bitcoin recently, and alts weren't following it as good as during the 2017 market. In 2017 people seriously believed that an altcoin might overtake Bitcoin because it is "old technology", but today Bitcoin's dominance is undisputed. I really don't believe that there will be a repeat of an altcoin bubble, far too many people are growing disappointed with alts, both as investors and as users.





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March 11, 2020, 08:58:42 PM
 #9

After almost 3 years, BCH is still trading above its launch price and is the #4 coin by market cap. If anything it seems like it will just keep following BTC. If a coin is relevant enough to be alive and kicking during the next bubble, it will pump alongside it.

It's tempting to condemn and write off altcoins generally but history says those that do will miss out on massive gains. Who wants to do that? Huh

BCH launch price was in range of $250-500, now it trades at $250, which I think is horrible for a cryptocurrency, since it's supposed to grow in the long run. If you switch to BTC price it's even worse, it's clear that BCH or almost any other altcoin performs worse than Bitcoin.

And last year BTC was trading in the low $3,000s right near its price when BCH was launched. So what? Doesn't say much about the long term.

I expect BCH/BTC to bubble alongside other altcoins in the next bullish cycle. I believe we're still in the very early stages of an ALT/BTC bull market. Let's see what happens over the next year or so.

The alt season is the only hope for altcoins to become relevant again, but there's no guarantee that it will come - we had two bullish periods for Bitcoin recently, and alts weren't following it as good as during the 2017 market.

That's how altcoin growth cycles work. The majority of the time, ALT/BTC pairs are ranging or downtrending. Their exponential growth happens over a very short period of time. This is similar to BTCUSD, which ranges/downtrends for years at a time and then enters short-lived parabolic bubbles.

In 2017 people seriously believed that an altcoin might overtake Bitcoin because it is "old technology", but today Bitcoin's dominance is undisputed. I really don't believe that there will be a repeat of an altcoin bubble, far too many people are growing disappointed with alts, both as investors and as users.

I see it more as a pendulum that swings back and forth. Everybody said altcoins were dead after the 2014-2015 bear too. Your sentiment (including your disbelief that altcoins can rise again) is indicative of the skepticism that occurs in early bull markets.

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March 13, 2020, 09:40:50 AM
 #10

Unfortunately people's behavior , their financial situation , their needs are all different , one cannot just control everything like that , it does need to be understood that one trades , one invests according to their situation and no two ones are quite alike .
Therefore I do think that it won't even matter , what algorithm we use , or what we do , it cannot always fully control the marketing strategy .
Also when we talk about Whales man they hit on the most unexpected time , that's why they are into this market in the first place.

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