RE: Is Crypto in a Hyper Bubble? Is it Not? Here is a NEW Technical method to know
PE ratios are a poor measure to determine "value" becuz the "E" part of PE is based on anal-yst projections and anal-ysts are wrong more than right. Also, not sure you realized it but the PE of Enron when it was trading in the high $20's before complete collapse was only 3. In general, the stock market always gives "tells" before the asset it is pricing collapses from a bubble. If you do some reasearch you will find that the housing stocks set their highs in the spring of 2005, well before home prices topped in elate 2006 early 2007. The U.S. exchange traded bitcoin tracker GBTC actually failed to set a new 52 week high even as bitcoin itself just made a new high. This is a "tell" imo.
Volume in "actual" bitcoin decreased dramatically over the weekend so far, even as they drove price well above $2600. This could also be a tell.
Volume spiking dramatically on selloffs however.
Great points! I also agree that PE isn't the only way to quality check on the value and quality of a stock. It was just a method to provide a segway into discussing the Market Cap to Daily Transaction Volume ratio.
I definitely can see your point on foretelling of the housing market crash and on Enron. If we ignore Technical Analysis, at a fundamental level there might be a difference between these and the crypto space as of right now. The main aspect is simple scale. The Housing Market was centered on the U.S. Market with financial institutions performing nefarious deeds in the background by taking on far more risk than they should have with subprime loans. Enron, in an isolated way, was one of the worst cases of messing with accounting reports, hiding up bad deals, and the like. However, I don't think Crypto really fits the mold for either of these because of the nature of why those spaces crashed.
Crypto is sitting on top of a global market, not one focused on any single country. As a result there is considerable space to grow. And the growth is speculative, sure, but the climb up has really only begun. To say it's over before it's really begun to play in this round of growth might be zooming in too much on the recent downturn, as we've seen this behavior at least 4 times over the past 6 months. Each time we set new highs, and each time we're seeing a larger number of investors coming into the space. But we haven't even reached mainstream audiences, not remotely. So I'm not concerned about the top of the bubble just yet.
As for GBTC, their share prices were WAY overvalued to begin with. Around 2X for what a share represented to the equivalent value of Bitcoin. The reason for that is likely that they were really the only guys in the space focusing so heavily on Crypto. Investors who wanted to dive in but not have to deal with buying crypto directly saw this as their only vehicle. As time moves on we should see further corrections with GBTC down to a more accurate price level. I don't really see it as a tell that we're going to crash because of that.
As for Volumes, yes they did fall over the weekend, but that usually happens after a major spike up or down. Key is to keep a watch of what happens moving forward :)
Great thoughts. Keep them coming!
Also "decent" points except you admitted that you wouldn't want to be "isolated" in bitcoin, and if China truly is "controlling" pricing in bitcoin as the guy in this interview thinks (and I agree with), you are isolated by the whims of river boat gamblers...becuz that's what the Chinese are whenever they see a "frenzy." They loooove to "gamble." :-)
My indicators monitor only sentiment via price so if GBTC is that grossly mispriced it could still possibly mean that the "actual" bitcoin price is also driven on speculation. I go by the theory of waiting for prices to rally waaaay above a price that we "know" is going to be taken out. And then play for the "adjustment." GBTC still has a date with at least 160.00. I don't see anything that will change that altho the high on GBTC could still get taken out. But that would be a very tuff "sentiment" climb. Anyone who paid $500+ for GBTC is just "praying" for a move back above $500. I still think we will find out soon if it is an actual gauge for "live" bitcoin. Right now no change to my current outlook...even after GBTC opened up theu $426.
ON the previous bouts of selling the volume remained strong on the weekends. The overall volume in bitcoin was strongest when the Chinese (that's my story and I'm sticking to it) were running the price up. I imagine Chinese boiler rooms are likely mining the majority of bitcoin? That's a fundametal thing you could check out to help with the decision to sell here or hold. I just watch sentiment and sentiment only.
Enron basically took the entire blame for what happened in the natgas sector. There were at least a half dozen other companies that were equally as fraudulent yet when Enron went defunct they all rose from the dead. Chesapeake energy was one. It's back down "near" dead but this is the one I still watch periodically, WMB. This company should have gone defunct along with enrob, Calpine was another one.
http://bigcharts.marketwatch.com/advchart/frames/frames.asp?show=&insttype=&symb=wmb&x=62&y=21&time=18&startdate=1%2F4%2F1999&enddate=6%2F12%2F2017&freq=7&compidx=aaaaa%3A0&comptemptext=&comp=none&ma=0&maval=9&uf=0&lf=1024&lf2=2&lf3=8&type=2&style=320&size=4&timeFrameToggle=false&compareToToggle=false&indicatorsToggle=false&chartStyleToggle=false&state=11
My "theory" states that all pricing reverts back to the place where the "mispricing" began...no matter how high above there the price goes. WMB "should" still go defunct because it never paid for past fraud. A real market will eventually price it properly imo.