Is Bitcoin Overvalued at $14,000? Has the world gone crazy?
Here is what an expert analyst and trader at Monfex thinks about the Bitcoin’s value…
Over the past 6 months,Bitcoin has been growing at an exponential rate.
The year-to-date performance comprises 235% return, equivalent to monthly compound growth at 27% - an unprecedented return for traditional asset classes.
Now, everyone is talking about Bitcoin , and one question specifically, which is:
How could Bitcoin be worth $13,000? Is it overvalued?
What fundamentals underly this exponential growth?
Bitcoin may be overvalued, but not as much as you might think…
Bitcoin’s current price - $13,000 - is not absolutely insane.
At current market price, Bitcoin is most likely extremely undervalued or extremely overvalued - “middle of the road” is unlikely.
There is at least a small chance that Bitcoin will become a global reserve currency, much like the US dollar is today.
For example, if Bitcoin captures just 25% of offshore banking and emerging market fiat currency reserves, then it becomes a $10 trillion asset.
In this case, given the Bitcoin supply limit at 21 million, its market price would be $500,000. This is a big investment opportunity just by itself.
For comparison, the world’s total above-ground gold reserves are worth $7.7 trillion. Alternatively, the global supply of narrow money, which includes easily accessible banknotes and checking deposits, is worth $36.8 trillion.
These simple statistics show that if Bitcoin becomes a reserve currency and reaches mainstream adoption, then it is a multi-trillion dollar asset.
To put it into perspective, Bitcoin’s current market capitalization of $200 billion amounts to only 2% of its potential market cap.
So, investors are beginning to realize that this might be a once-in-a-lifetime opportunity. This leads to an ever-increasing demand for Bitcoin , which translates into an exponential growth of its price we’re seeing today.
Today, nobody knows for sure what the fair value of Bitcoin really is. There is no such thing as a Bitcoin valuation model, as opposed to traditional equity markets. As a result, there is no consensus on the market as to what the market price of Bitcoin should be, and there are lots of differing opinions, which leads to extremely high Bitcoin price.
Moreover, there are no fundamental catalysts yet which would rationalize the value of Bitcoin at $13,000 or even higher.
However, investors recognize that such catalysts may emerge in the future, and the potential impact on the Bitcoin price, as shown above, would be immense.
Potentially, there is about 40x upside at the current market price.
This is what drives investors insane and pushes demand increasingly higher.
So, although Bitcoin might be overvalued, we wouldn't recommend selling it today.
The current upwards trend has gained strong momentum, and the best investing strategy now is to continue to hold Bitcoin .
Today, the following trade signal is active:
- Continue holding a long position in Bitcoin . If you have not bought yet - set a buy limit order at $11,000.
- Place a stop-loss order at $10,000
- Place a take-profit order at $20,000
In this trade, the expected risk/reward ratio is 9.0x, which is an extremely attractive exposure!
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This analysis has been prepared for you by Monfex- a revolutionary cryptocurrency trading platform.