Tough Valuations.
One of the first posts that I wrote for SIMETRI was about why and when $BTC can reach over $300,000. That was a pretty naive valuation model, but it’s still reasonable. The issue is that there are many reasonable models.
Crypto valuations have been of interest to me since I started as an analyst. In a new asset class, you want to have at least some guidance on approaching it. Is $BTC or $ETH adequately priced, cheap or expensive? How do you know?
The least effective mental model to use is looking at the price of a coin. Ironically, it’s how many inexperienced crypto participants treat asset valuations. If a token costs pennies, you can buy millions of tokens and fantasize about being a millionaire when it reaches $1. That’s unit bias.
If you don’t have unit bias, all you care about is whether an asset in question is likely to grow in value and why.
Financial professionals will always come up with valuation models. The person I respect the most in this regard is Chris Burniske. However, even his models included variables that couldn’t be set according to real-world values. That’s why these models aren’t practical.
In 2015 Chris and his colleague thought $BTC would be $20,000 if it could process all global remittances. What a time!
Another person I deeply respect, Arthur Hayes, recently published an article with a valuation model for $ETH. It’s pretty complex, and I encourage you to read it, but if you have no time, the TL;DR is: $ETH is significantly undervalued based on staking rewards.
Like Chris in 2015, Arthur may be significantly wrong with his assumptions. He may be too conservative or overly optimistic. The issue is that we will never know which one.
This doesn’t mean that we’re blind on the market. We have cues like Terra buying $BTC in size to support $UST and the Ethereum merge potentially coming this summer. All this points to bullish several months, despite the stock market not doing well lately.
SIMETRI Portfolio – Getting in the Green
Even though $BTC slightly dipped today, the market is still looking ready to continue growth. The portfolio is getting closer to breakeven/profit across the board.
We also found a way to better account for $BTRFLY performance. The way the token works, it’s not reasonable to compare the entry price to the current one because of the staking rewards. We are implementing a fix for it for the new version of the portfolio.
