Bitcoin: The Beauty of Mathematics (Part 54)

hey everyone and thanks for jumping back into the cryptoverse today we're going to talk about Bitcoin the beauty of mathematics part 54 if you guys like the content make sure you subscribe to the channel give the video a thumbs up and also check out the sale on into the cryptoverse premium add into the cryptoverse decom let's go ahead and jump in so it is a new year uh but around the first of the month every every month we try to do this video where we talk about about the fair value logarithmic aggression trend line for

the entire cryptocurrency asset class and as of January 1st 2025 the fair value is approximately 3.26 7 trillion whereas the overall market cap right now is around 3371 trillion so this still represents a slight overvaluation of about 3% but it is still playing out and a somewhat familiar fashion as we have seen historically Bitcoin and the entire crypto asset class goes through periods of overvaluation and then undervaluation now if you look at at the last few Cycles if you start off with the cycle back over here it went durably overvalued in February of the post

having year if you look at the cycle after that it went durably overvalued in April of the post having year if you look at this last cycle back in 2020 and 2021 it went durably overvalued in November of the having year so right now we're still sitting just around the fair value logarithmic aggression trend line it's hard to say if this is the move which leads to that more durable overvaluation that then lasts for another year or two but it could be um note it it is always possible that you get sort of a um

a drop back below the fair value uh before you then see it really go durably overvalued it doesn't have to play out like that and in fact in 2016 it didn't right once it went overvalued it just didn't really look back but if you do look at the other two cycles you can see there was a sort of a brief period of overvaluation and then back down and then slight overvaluation even in you know in the having year and then one last sell off before it really geared up for a more you know longer period

in the overvaluation range then if you look at last cycle did something kind of similar where at first went overvalued came back down went slightly overvalued one final shake out obviously pandemic uh and then it really took off so if you do see it come back below the fair value logarithmic aggression trend line like if you see it come back into this region it probably would represent an opportunity if it in fact occurs but again right now yeah ass class is about 3% above the fair value and it's interesting cuz you know the asset class

the total market cap now is over 3 trillion which is basically where it was you know way back over here at at the prior Peak uh in the last cycle but last cycle when we hit that Peak the fair value was only 700 billion or so but you fast forward 3 years and now the fair value quote unquote fair value is closer to 3 trillion right so you know if it were to go back below 3 trillion that would be considered an under that would make it undervalued right with respect to the fair value logarithmic

regression trend line and the reason this is even a thing that I track is because the idea is that you know the longer time goes on the more people sort of get on boarded to the asset class therefore the asset class overall should continue to grow um this sort of represents you know maybe the adoption curve um I I tend to follow more sort of the logarithmic uh regression view rather than some of the more optimistic views uh but this to me seems like it it it generally has has tracked the best so that's where

I stand if you overlay the summary risk metric which accounts for bitcoin price onchain data and social data this is what it looks like kind of gives you an idea of where we currently are in the current market Market cycle and you can see sort of these periods of overvaluation and undervaluation historically you know you during periods of undervaluation Bitcoin dominance goes up right so alts bleed back to bitcoin once you go durably overvalued that's usually when Bitcoin dominance can actually start to go down and that's why it's important to track this stuff because if

you want to see Bitcoin dominance go down at some point in 2025 it would likely really only do so once the asset class uh becomes you know more overvalued compared to the fair value long M regression trend line now if you take the percent difference between the total market cap and the fair value you get this chart right here and and you can kind of see what I'm talking about how like in the 2016 2017 cycle once it went overvalued it didn't really look back um but if you look at the other two cycles you

can kind of see going above the fair value a few times and then on the third attempt really durably breaking through and then last cycle kind of something similar right one attempt the second attempt and the third attempt really got through so we'll see if that plays out again um as it has in in Prior Cycles or if it if it just plays out like the 2016 cycle there have been a lot of similarities between this cycle and the uh and the 2016 cycle in fact if you look at the ROI from the low uh

this cycle and just compare it to to the 2016 cycle I mean you can see they they do match fairly well um in fact the ROI from that cycle also saw sort of a local top you know a little bit higher than it currently went then dropped for about a month or two before continuing uh continuing on but I think that this is you know it's useful to track this stuff it's useful to look at sort of the overall view of the asset class to give you sort of the uh the higher level view cuz

easy to get lost in the weeds of the everyday movements in the market but I like to go back to this uh to give you an idea of of where the asset class is and again I mean the the the hope the goal I think is is for the asset class to hit 10 trillion uh eventually plus or minus a few trillion as we go to sleep at night we cannot help but wonder what's a few trillion dollars among friends see you guys next time bye