Bitcoin: The Beauty of Mathematics (Part 41)

Hey everyone and thanks for jumping back Into the Cryptoverse today we're going to talk About Bitcoin the beauty of mathematics Part 41 if you guys like the content Make sure you subscribe to the channel Give the video a thumbs up and check out The sale on into the cryptoverse premium At intothe cryptoverse decom links in The description below let's go ahead and Jump in so as of early December of 2023 The total market cap is currently coming In at around 1. 1483 Trillion where the fair value Logarithmic aggression trend line fit to All prior data at approximately 2.26 3 Trillion this represents an Undervaluation of approximately 34.4 7% now if you have not been following This series the purpose of it is to take A step back away from the shorter time Frames and to look at the bigger picture Of the cryptocurrency asset class and The bigger picture is that we go through Periods of Undervaluation and we go through periods Of Overvaluation right that's generally What we See And this time has not been Different my expectation for this year

Has been that we would spend the entire Year below the red fair value logar Regression trend line but above the Lower green regression trend line and so Far we have continued to do that we have Not deviated outside of that bound okay So our expectations there continue to be Met it's not to say that it can't Deviate outside of it there is still you Know we we still have the last month of The year to go but but at this point We're still comfortably within the range The lower band all the way down at 762 Billion or so the upper band or or sorry The fair value at around 2266 trillion so we're still comfortably Within that band and one of the things That we've said this year and and it Often happens when we're in this Undervaluation territory is that we we Get this rotation of capital typically From altcoins to bitcoin where Bitcoin Dominance goes up and the market sort of Heals itself okay and again this time Has not been any different right the Market we've seen Capital slowly go from Alts to bitcoin that's not to say not All you know that's not to say that some Altcoins are not up I know that some of Them are but we we can see that the Bitcoin dominance has gone you know from 39% or so to around 53% where it is Today so that Trend continues To play out and my guess will continue

To play out throughout the end of the Year now Remember periods of undervaluation and Overvaluation can last years before they Reverse course into the other Regime back in 2015 you can see that we Fell below the fair value in January of 2015 but did not go back into Overvaluation teritory until May of 2017 So it took Approximately 2 and2 Years this time we fell below the fair Value in June of 2022 we're almost at the end of 2023 so It's been about one and a half years if We were to follow what happened over Here then it could lead you to believe That it might take another year before We even go into the overvaluation Territory if you look at last cycle it Was a little bit different in the sense That we did go above the fair value for A little bit you can see we did in 2019 um but if you ignore that which I'm Not saying is is a smart idea but if you Were to say all right well how long did It take for us to durably get back above It for more than just a few months you Can see that we fell below it in December of 2018 and we not really Durably get back above it until December Of 2020 so in that case it took about 2 Years right so you have 2 years two and A half years and then over here if you

Exclude sort of this initial Peak above It just like we had in 2019 you can see That we fell below it you know late 2011 Like October of 2011 maybe November to To really go below it and then we broke Back above it in February of 2013 so in That case it took just over a year so You have about a year two and a half Years two years so far we're at a year And a half all right and we've had a Pretty great move recently but we're Still well below the fair value Logarithmic aggression trend line so Just keep in mind you know the Expectation for this year was never for Us to go back into overvaluation Territory that's not a common thing that Happens in prehab years although there Are some exceptions to the rule where it Will it'll happen for a brief period of Time like 2019 um but it's not something that that You know we we've seen necessarily every Cycle and we didn't see it in 2015 we Haven't seen it in 2023 in terms of Going back above the fair value Logarithmic aggression trend line one of The things that is interesting to carry Out is this exercise of total crypto Market cap divided by the fair value and If you do that you get a chart that Looks like this okay and you can see That despite the fact that total market Cap has trended

Higher we're actually not as high up in Terms of our valuation with respect to The fair value regression trend line and The reason again for that is remember The fair value assumes that there's just Ongoing adoption right within the asset Class and so the fair value is a Monotonically increasing function you Know the the idea is that the asset Class just generally trans higher so if It's not keeping Pace with that even if It's going up then we get further away From the fair value so we were actually Closer to the fair value in April of 2023 than we are right now okay that's a Fact based on this chart that's fact is A loose term I mean like it it's a fact Based on this chart but whether we Whether we assigned that fair value as You know that evaluation back then That's not neily effect that's just sort Of a a model speculation from a model But in terms of this model we are uh We're not as close to that red trend Line as we were back in April so what's Interesting is what you'll see here is Is really it's been slowly going down Right like I mean every time we've had a Peak on sort of the extension from the Fair value it's it's been going down Okay so this will be something to keep An eye out on now one of the things We've mention before and and I I'll just Go through it again just in case that it

Happens um we've talked about this a Number of times but it's the idea uh Generally speaking that you know Sometimes you'll sort of go sideways Until you get close to the lower Regressional trend line right and you Can see that it happened over here in 2015 um and then we just sort of rode That up for a long time last cycle very Similar thing where we essentially we Came all the way back down to to the Lower band I know it doesn't look like It because the total market cap on the Screen you can see it went down to 140 Billion or so the the lower band was Actually at 107 billion but do remember That on a Wick right on a wick we did go down There right on On the you know the wick that we had Right here there was about 100 billion 108 billion or so which is essentially Where that lower green regression trend Line is so the point is to say you know You always look at this trend line and Say well you know if we were to go Sideways how long would it take us to Hit the green regression trend line so From these valuations it would take you Until February 2025 maybe March of 2025 To sort of get to the lower green Regression trend line if we were to just Go sideways at this valuation the Current lower regression trend line

Again is at about 758 billion or so at the time of this And then the fair value again is a Little over 2 trillion so I know it's a Pretty big range but I mean you guys see You know just how quickly crypto can Move um and so it's important to sort of Keep those those those numbers in mind Just in case there is a continued move To the upside or if there is a surprise Move to the downside which I know it's Not certainly not a popular thing to Talk about and I'm not going to you know Spend a ton of time talking about it Just because there has been a lot of Momentum and I know people are excited And and you know people love to ride That momentum but it's always a good Reminder you know just to sort of remind Ourselves in general that sometimes Those things can happen those events can Happen and and you know you should be Prepared for it if it does happen um Regardless okay so we'll continue to Update this chart as as the months go on So far really not a whole lot has Changed right I mean we have slowly Trended up but despite trending up we're Still kind of just in between the fair Value and the lower green regression Trend line if you look at how far down We went undervalued the last couple of Cycles you and we just sort of draw a Line across the page you can see that

You know last cycle we we came all the Way down here to around you know I guess Around 55% below the fair Value um maybe maybe a little bit more On the wick I mean on the wick it was it Was more so like 60 to 65% Undervaluation same thing over here Right in in 2015 2012 we we did not go As undervalued as we already have gone This cycle and then a couple years Before that we we were actually even More undervalued at around 68% Undervaluation so interesting Trend here Sort of keep an eye on in terms of the Extent of undervaluation you can see Where we are currently with respect to Where we've gone the last couple of Cycles so again the reason why we make These videos is so that you don't get Caught up in the day-to-day or the short Term but to remind yourself of what the Long-term view is of the asset class Right and I I've said that many many Times right the the general idea is that When it's undervalued you scale into the Asset class when it's overvalued you Scale out I have had a biased view Because in in you know in Pre having Years it generally pays to be Bitcoin Heavy over alt Heavy that view has gotten me into a lot Of trouble this year because of course Some altcoins outperform but then again As we said at the beginning of the year

There will always be some altcoins that Outperform but the general Trend right The general trend is that Bitcoin will Take more and more dominance as the year Goes on and so that Bitcoin heavy portfolios in prehab years Tend to outperform most altcoin heavy Portfolios although in any given week or Month you can find you know 100 altcoins That have outperformed Bitcoin the the Hard part is a lot of the ones that are Outperforming it today are different Than the ones that were popping off in April and then those are different than The ones that were popping off in you Know in Q3 of 2022 right so it's really Hit or miss as to which one of those are Are are moving against Bitcoin but the General trend has has been that Bitcoin Has been slowly taking back that Dominance and so scaling in to the Market in prehab years again Bitcoin Heavy portfolios tend to do better on Average than altcoin heavy portfolios as Capital rotates from one sector to the Other but again guys I mean you know my Expectations is that we'll still be Between these two trend lines uh for a While longer could go well into 2024 you Know last cycle we didn't durably get Above it until the end of the having Year the cycle before that we didn't Durably get above it until the post About halfway through the post taing

Year so again you know these things can Can take time but you also have to be Ready for anything you know the market Moves quickly in in both directions my General View and I've said this before Is that I I I do eventually think that The asset class will hit 10 trillion Okay um I know you know we talked Yesterday about sort of the recession Risk and and we have the inverted Yi Curve and we still have all of that to Deal with you know we still have all That to deal with at some point and and It could put a wrench in the plans um Temporarily of course but overall over The long term my view is that the asset Class will go to 10 trillion 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 give the video Thumbs up again check out the sale on Into the cryptoverse premium at intothe Crypt.of