FX FUNDAMENTAL ANALYSIS And computing
because of the massive power
required, the
operating margins of mining BTC have collapsed. (Chart 7)
Thus, we have a somewhat restricted supply at these prices.
However, the number of people storing Bitcoins is going up exponentially. (Chart 8)
And the number of transactions per day is so far robust. (Chart 9)
Meanwhile, BTC has switched from being a mechanism for some people to find an alternative to gold to something more of a transactional currency and a way around capital controls.
IT’S JUST DEMAND
SUPPLY AND
Tus we have a classic supply and demand imbalance in the making and acceptance is growing rapidly.
I think we are in the take-off stage.
Tis all sounds good but what is the fair value of such a currency?
Again, we can turn to gold. If Bitcoin exhibits the same properties as gold in that it is finite in amount, is an exchange of value, is transportable and it costs more and more to mine the remaining reserves, then it should have a relative value versus gold which is vaguely quantifiable.
40 FX TRADER MAGAZINE January - March 2014 Chart 8: My Wallet – Number of Users RELATIVE VALUES MUST
APPLY FOR IT TO BE AN ASSET
As I have shown over the years, all asset prices trade in broad bands versus each other, going up and down in secular cycles. Whether it’s Gold versus Stocks, or Oil versus Gold, or Wheat versus Oil, or Property versus Gold. All assets
Source:
blockchain.info
have a relative value and always will do (and must do to be an asset).
You can see the obvious relative
value from the chart of Gold versus Platinum. They trade in a range. The same should be true of Bitcoin…
Thus, taking into account that only 55% of all Bitcoins have been mined, versus 65% of all gold, then
Chart 7: BTC Mining Operating Margin Source:
blockchain.info
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