Bitcoin: The Beauty of Mathematics (Part 32)

Hey everyone and thanks for jumping back Into the cryptiverse today we're going To talk about Bitcoin the beauty of Mathematics part 32. if you guys like The content make sure you subscribe to The channel give the video a thumbs up And also check out into the cryptoverse Premium at into the we do Have several different tiers available Including a free one make sure you check It out links in the description below Now as always I I would be remiss to Remind you that while it is called Bitcoin the beauty of mathematics we're Talking about the entire cryptocurrency Market capitalization And as of February 1st 2023 the total Cryptocurrency market capitalization is Coming in at a modest 1.04 trillion compared to the fair value Logarithmic regression trend line Of 1.87 trillion this represents an Undervaluation of approximately 44 now Remember the reason we use this type of Chart is to show when we're undervalued And when we're overvalued as a function Of time when we're overvalued it might Often feel like we're not because There's so much momentum there's so many New people coming into the space But history shows us that we do Eventually go back down to the Undervaluation territory and in the same Way when we're undervalued it might feel

Like we'll never go back to the Overvaluation territory but once again History shows us that eventually we do Now one of the reasons why I like this Chart is because we can see the length Of time that Bitcoin and the entire Cryptocurrency asset class as a whole Can spend and the undervaluation or Overvaluation regimes for instance back In 2015 we entered into the Undervaluation territory and did not Leave it until close to Mid 2017 or Approximately two and a half years In 2019 or late 2018 we entered into the Undervaluation regime and while we poked Our hat above it a little bit in 2019 it Was it was more or less a false breakout And we continued to stay below it until About late 2020. so all in all the Undervaluation territory we get quite Comfortable in it and we can spend a Couple years in that range before having A realistic chance of getting back above The fair value logarithmic aggression Trend line in a sustained way now Remember this is a monotonically Increasing function so the idea is that As a function of time the fair value of The cryptocurrency asset class will Ultimately Trend higher one of the Things to also note here Is that right now where we are again We're at 1.04 trillion and this Represents an undervaluation of

Approximately 44 but we could still be An undervaluation territory for the Entirety of 2023. now if we if we get a Nice rally like we got in 2019 then it's Possible we can get back above it in the Short term but I would say to go into This year with the expectation that the Asset class as a whole is going to be in The undervaluation regime would probably Be the best way to go into this year Just to keep your expectations in check Um and to just sort of be patient and And recognize that as we get further out In time like say the 2024 2025 time Frame then perhaps we will see uh more You know more favorable monetary Conditions Um and and perhaps more more clarity on On exactly how cryptocurrency is going To be treated uh in a in a sort of from The regulations point of view so again Today we still sit undervalued we sat Undervalued last month and the month Before that and really we have been Undervalued since about maybe about Mid-2022 when we had that initial Capitulation in June where Bitcoin went Down to 17.5 K ethereum went below a Thousand dollars and ever since then We've more or less just been sort of Humming along Um I'd more or less similar valuations Right I mean I I know it certainly feels Like a lot has happened between now and

Uh and and June of 2022 but in the grand Scheme of things that the market hasn't Really done a whole lot if you look at This chart you'll notice that we've had Three clear Peaks uh where we hit the Upper logarithmic regression trend line But you also notice that in the last Cycle we did not we actually had sort of Two more intermediate Peaks somewhat Similar to 2013 but the second Peak was Was sort of fell short of the of the Higher logarithmic regression Trend Light and arguably due in part to the Quickly deteriorating macroeconomic Conditions Um which is something we've you know We've continued we've started to really Focus on here in 2022 and 2023 but it's Also a reminder that when it comes to Crypto the the typically the best Strategy that I have found is is not Trying to time the bottom not trying to Time the top but to slowly enter the Market when it feels or it seems like The market is undervalued uh and you can Use that under valuation metric any way You want whether you're using this Metric or some other metric that you're Looking at And then to scale out of the market when It's overvalued now of course it's going To be difficult oftentimes to scale out Of the market when it's overvalued Because I mean you're going to have tons

Of people pouring in and saying it's Crazy to sell but in the grand scheme of Things you know these are the types of Rallies that you want to sell into Um and I mean in in 2020 in 2021 this Was basically where you know this is Where most of my sales occurred not on The second top I was I was actually Hoping it would go a bit higher so Majority of mine came from the first one Not the second one and that's why I say Oftentimes they never let a good bubble Go to waste you don't know when they're Going to occur it's certainly not back Then a lot of us did not know that we Were about to go up to sixty four Thousand dollars Um but if and when it happens you you Know you simply never want to let a good Bubble go to waste you don't know when They're going to occur and and you sort Of have to do away with these you know These price predictions that that are Often flooded into the market of Bitcoins going to a certain valuation Whether it be you know 100K or 200k or Whatever it might be at the end of the Day you know that that stuff is is Largely irrelevant okay you have to you Have to look at at a lot of other things Not just a price prediction Um based on on dubious speculation at Best right so The other thing I wanted to talk about

Is if you take the percent difference Between the fair value or sorry between The total market cap which is the white Line And the fair value logarithmic Regression trend line which is the which Is the red line you'll get a chart that Looks like this and again you'll see how We tend to come back down into this Deeply undervalued territory that has Historically gone all the way down to You know 65 undervalued 60 to 65 percent Undervalued somewhere you know somewhere In that ballpark right somewhere in that In that ballpark and what's interesting Is is you can see we're we're we sort of We remain in that area now now we could Go lower and and and I want to explain What I mean by that it could mean two Things right so the way you go lower on The undervaluation chart Did you either the price drops right Because the price drops then we get more Undervalued if it drops quickly enough Or Or even if it doesn't right if it just If it's just dropping because the Because the reference point Monotonically increases if it's dropping The fair value the undervaluation is Going down or if you just go sideways Okay so if if we were to go sideways for Another year We would eventually hit this lower green

Trend line you can kind of see that's What happened over here in 2015 to 2016 And also what happened over here from 2019 to early 2020. We just sort of went sideways for a long Time until we hit it and you might say Well why would we become more Undervalued just by going sideways the Reference point is changing right so the Reference point continues to change so Then that's why despite the fact that March of 2020 was technically a higher Price for Bitcoin it wasn't a higher Price for all cryptocurrencies but the Fair value was much higher and so we Were much more we were more deeply Undervalued in March of 2020 than we Were in December 2018. just because the You know the rate at at the fair value Increasing was it was so much higher Than it should have than it was back in December 2018 that it made since we were More undervalued And it was from that point that we Actually went on a nice bull market uh That took us up to like you know 400 or So overvalued with respect to the fair Value logarithm congression trend line So then you know you look at it right Now and and again we're coming in about 44 undervalued or so Um you know If you look at it like this you'll Notice that we haven't really gotten

Down to the the very deep undervaluation Territory to the tune of like 65 Undervalued 60 to 65 percent undervalued It doesn't mean it has to come there's An example over here in 2011 and 2012 Where it never came but There's always a chance right that we Just continue either going sideways and The fair value gets further away Therefore the undervaluation gets more Or we see lower prices and and we go Back down into the undervaluation OR Deeper undervaluation undervaluation Territories so again two different Scenarios to actually get you to that Mark and if you do something like that Then you know it would essentially it Would essentially mean Um hitting this green lower regression Trend line at some point in the future Right could happen tomorrow could happen Six months from now could happen a year And a half from now we never really know But history shows us that hitting that Trend line is is typically uh not the Worst place to get into the market Whether it's at a lower price or not or Whether we just go sideways for another Year and then it's at that same level is Obviously is obviously unknown but just Wanted to provide this update on the Total crypto market cap and trend line And I I do hope it is is valuable to Everyone in terms of navigating the

Cryptoverse so in undervaluation Territories it's you know generally Better to slowly scale in and Overvaluation territories is generally Better better to scale out but you Always you also have to be careful in Undervaluation territories because it's Always about what do you scale into Um Plenty of cryptocurrencies will never go Back to their all-time highs and that's A common mistake I see a lot of Newcomers make is you know assuming that Just because something's down 95 98 Means that it'll go back to New all-time Highs and Um you know you'll make a lot of money That way that is you know you have to Remember the market cap can go back up Because because the blue chips are going Back up and all the new shiny objects For the next cycler going up with it not Because a relic of a prior cycle that Potentially has outdated technology Compared to what's been created in the Last the last bear Market has so just Remember that you have to be careful as To which ones you actually get not all Of them will put in new all-time highs And I would argue most of them will not Put a new all-time highs the Blue Chips Of course are are Bitcoin and ethereum And and then you can take your picks Beyond that this is just my opinion not

Financial advice but just remember There are plenty of all coins that will Not go to all-time highs so don't rely On the asset class as a whole to to sort Of get you out of of um of of a Portfolio that's down a lot if you're Just simply holding on to a lot of micro Caps that that might just be forgotten In the crypto verse by the next uh by The next bull market so hopefully again Hopefully this video is as useful and I As I've said many times right I I would Like to see the overall market cap Eventually hit 10 trillion whether it Happens next cycle is is probably going To be dependent on on a lot of the the Macro economic conditions for instance If inflation were to come back in a Significant way in the next like two Years or so then it we could have a Similar effect where we don't quite make It up to as high as we could achieve Um But if it doesn't then of course we have A much more realistic chance but again The goal is for us to see crypto hit 10 Trillion dollars by market Capitalization plus or minus a few Trillion and as we go to sleep at night We cannot help but wonder what's a few Trillion dollars among friends thank you Guys for tuning in make sure you Subscribe we have into the crypto versus Premium and into the see

You guys next time bye


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