Bitcoin: The Beauty of Mathematics (Part 33)

Hey everyone and thanks for jumping back Into the cryptoverse today we're going To talk about Bitcoin the beauty of Mathematics part 33. 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 crypto Various premium at into the now we do this video Series on the first of every month and It is actually about the entire asset Class as a whole so the market cap of of All of cryptocurrency not just Bitcoin And you might wonder why do we do this Video series on the first of every month What purpose does it serve and the main Purpose at least for me is to is to take A step back From everything that goes on the Day-to-day right there's all this macro Stuff inflation Um you know the SEC going after a lot of Different cryptocurrency companies and And projects Etc right there's a lot of Noise that occurs in the short term But charts like this over the macro Scale I I think they're actually quite Helpful because they help you tune out Some of that stuff now we still talk About a lot of that stuff but again I Think it's it's worthwhile to every Month take a step back from the market And say okay in the grand scheme of Things where are we with respect to the

Fair value now the fair value Logarithmic regression trend line is This red line right here and it is fit To all data so sometimes we talk about You know fit to non-bubble data or some Sometimes we fit the regression lines to Peak data like the upper green line up Here but the red line is fit to all data And the purpose is to say look Cryptocurrency spends a lot of time in Undervaluation territory and it spends a Lot of time in over evaluation territory And it's hard communicating uh you know Effective strategies when you're in the Midst of one but you want to do the Other right so the whole idea of course Is and again it's not Financial advice But the whole idea generally speaking is To scale into the market when it's Undervalued and to scale out of the Market when it's overvalued but remember In the same way that we can spend a long Time being overvalued over a year we can Spend a long time being undervalued as Well and A case a case in point here is just take A look at what happened in 2015 and 2016. we spent basically the entirety of Those two years in the undervaluation Region and in 2019 and 2020 we basically Spent the entire time in the Undervaluation region except for a few Months in early to mid 2019 where we Actually went above the fair value for a

Very brief period of time Now the reason why we talk about this is Again it can be it can be easy to sort Of get distracted by by all the noise That goes on and and of course there's a Lot of it but when you take a step back You'll notice a couple of things at Least coming out of the last two Undervaluation regions right and that is Before the next bull market started that Took us to new highs we tagged the lower Logarithmic regression trend line right So you can see over here and over here We tagged it eventually Now in both cases we went sideways until We tagged it 2015 was a bit more Sideways 2019 was more so up and then Back down but in both cases we Eventually tagged the lower logarithmic Aggression trend line And ultimately after tagging that we Went into another Bull Run so Right now my best interpretation of What's going on is that we're doing the Same thing we always do during a Recovery year right and that's to sort Of chop around for a bit you wreck both The Bulls and the bears for a while and Of course this year so far we've been Wrecking the Bears quite quite handily And the whole idea is is you know Everyone sort of has their strong Opinion as to what's going to happen and A lot of people front run the next

Having and then we normally come back Down before the next having and then Afterwards we then go back up and I do Know there's there's a lot of popular Narrative circulating circulating right Now Um as to you know as to seeing a major Peak before the next having Um but I don't really see us you know I Don't really see Bitcoin going to new Highs in in 2023 I just I I know I could Be wrong right but I don't think the um The the macro verse allows for it right Now and and additionally just in the Context of History this same narrative Pops up every time we get you know into A recovery year and that's you know this Rally is going to take us to highs only For us to sort of come back down Um you know sometime in the second half Of the year so I think that when you Look at this chart what it tells me is That we're likely going to spend a while In the undervaluation territory and my Guess is that we'll likely spend all of 2023 in the undervaluation territory if I'm wrong on that it's I would assume That it's because it's doing something Like 2019 where it goes above it just Briefly but it's unable to sustain it And and we'd have another we'd have Another go at it perhaps you know 12 to 18 months later so when I look at this Again I would still suspect that we're

Likely going to spend A good part of this year if not the Entire year in this undervaluation Territory I do imagine that at some Point we will tag the lower logarithmic Regression trend line and I think it'll Probably occur before the next having uh Whether that means we go sideways into It or we go down into it is obviously up For interpretation now You might say well you know you're if if This is the if when it's undervalued you Scale in and when it's overvalued you Scale out well you know is that is that Something you just sort of stick to and This is the hard thing right because Even if even if Bitcoin were to go down Another 30 50 the whole idea is it's Still in this undervaluation territory And so even you know even in even in the Summer of 2022 we were already Technically undervalued even though we Eventually put in new lows so in the Same way even if we were to go back and Retest the lows or go to new lows we Would actually be more undervalued at That time than we are now simply because The reference point is continuing to Trend higher okay so the as the Reference point goes higher the level of Undervaluation would would go or would Be more undervalued even if the play Even if the price were to stay Relatively constant so again this is why

I've said many times right a DCA Strategy typically works best I focus More on on Dynamic DCA which is where You try to weight it according to the Risk levels and as I've said before Right I'm only interested in Bitcoin at This phase normally because even even in Recovery Years you'll still see the Altcoin market bleed back to bitcoin Um and typically the altcoin market on Their Bitcoin pairs could could easily Push new lows we saw it you know we've Seen it time and time again uh we'll Likely see a you know continuation of That so again as of today the market cap Is coming in at 1.08 trillion 1.08 Trillion the fair value is at 1.92 Trillion this represents an Undervaluation of approximately 44 Percent as of March 1st 2023. if you Look at the prior major Peaks you can See we had three Peaks that touched the Top of the log on the congression trend Line we know that we've had three that Didn't one was the intermediate peak in 2013 and the other two were in this last Cycle where we had more tempered Peaks Arguably because inflation came roaring Back and the Federal Reserve had to act Very quickly to try to get that under Control but that is where we currently Stand on so far now again we talked About undervaluation overvaluation if You take the percent difference between

The red line and the market cap which is This white line you get something that Looks like this and what you'll notice Is that when we come back down into this Range we can spend a while in this Undervaluation territory we did in 2015 2016 we also did in 2019 and 2020 again We popped our head above it very briefly But it was not a sustained move we ended Up coming back down despite the fact That that we the undervaluation level Was lower over here we also know that we Didn't technically put in a new low in Terms of total market cap the reason why That's important again is because the Fair value is changing okay so we were Further along within our adoption cycle Of crypto and and so this was Technically more undervalued than 2018 Even though 2018 was was actually at a Lower price it was just because you know There's been much more adoption much More development in the crypto verse That these prices where a lot of all Coins actually put in new lows uh where We're not justified now Bitcoin put in a Higher low ethereum I believe was Technically a higher low but it was very Close to being a double bottom and so I Think we're likely just going to spend Some time in this range down here being In the undervaluation range for a good Part of this year and then hopefully as We get out into 2024 2025 we'll see some

Over evaluation territory again it's Easy to forget what that feels like Um just because it hasn't it hasn't Happened in quite a while but but this Is where we currently stand okay so and Again you could you could sort of Isolate down the 65 undervaluation you Can see we went to that level in this First sort of region over here we went To it over here in 2015 uh we tagged it In 2020 we have not yet tagged it this Time are we going to is it a sure thing Nothing's a sure thing you can see that It did not happen in 20 you know in 2012 During the spare Market we did not go Down to 65 undervalued but considering That it happened the last two times There certainly is a chance that we we Actually go to that 65 undervaluation at Some point within the next year or so Again one way that you get there is you Either go straight down into it or you Go sideways until you hit it for Instance if the total market cap right Now were to go sideways at these Valuations which we know it's probably Not but if it were to go sideways it Would take until the first quarter of 2024 to hit the lower logger in the Congression trend line which is Interesting because it's right before The next having and it's also Essentially where we where we tagged it In early 2020 as well okay which was

Also right before the last um The last having so this is I think is is What we have to ultimately consider when When thinking about where are we within The crypto virus I know it's easy to get Distracted by Um you know everything that's going on With with inflation and with the the FED Raising interest rates and with the Recession indicators flashing uh but I Think it's important to also consider That whenever these recession indicators Are resolved when you see the Uninversion of the yield curve and all This sort of other stuff that could be The point at which you see the the sort Of the the secondary or the the tap on The lower progression trend line before Going into a another Um sustained bull market hopefully this Video is useful to it to everyone Navigating the crypto verse and trying To realize or trying to understand when Are we undervalued when are we Overvalued we've essentially been Undervalued for you know at least half a Year probably about eight or nine months You can see the market cap of crypto has Technically been in this undervaluation Level uh it's likely going to stay in The under evaluation level for a while Even a pump by Bitcoin you know to 30k Would still technically be undervalued Okay I mean it would still likely I

Guess it actually depends on the the Rest of the market uh where where the Rest of the market would be but Again arguably even a pump to 30k would Still technically be in this Undervaluation territory so again sort Of summarize we are still undervalued to The tune of about 44 it's more or less The same that we've been at since August You know and I know it's there's a lot Of hype right now but again the the Valuations are are still Um around the same level as they've been At for About half a year now and and we're Likely going to continue chopping around In the undervaluation regime for another Six to 12 months or so is my guess and Then and then by that point once we get Back to Um more uh you know easier monetary Policy you could you would more likely See a sustained room sustained move to The upside back into the overvaluation Levels so again you know in the same way That 2022 is is going to be remembered As a bear Market year just like 2018 and 2014. I think you're likely going to see 2023 be remembered as a recovery year Just like 2015 and 2019 where you spend About half the time going up half the Time going down everyone gets Sufficiently wrecked and then the Following year we finally start to um

Uh see some see some more sustained Moves to the upside one of the things I've mentioned many times is that I'd Ultimately like to see us get to a 10 Trillion dollar market capitalization For the entire asset class as a whole 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 to the Channel give the video a thumbs up and I'll see you guys next time bye


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