——Answering the concepts in the article “Invite Satoshi Nakamoto to Welcome the New World”
Zhu Weisha Modified on September 7, 2024
After the “Please Invite Satoshi Nakamoto to Welcome the New World” series was published, readers reported that the article involved too many concepts and covered too many fields, and many ideas were not understood. They hoped that I would explain the concepts and terms in detail. Here are some explanations for some easily confused concepts and relatively new terms for discussion with readers.
This section is the critical point for observing the rise and fall of Bitcoin.
10. Speculative funds drive the rise of Bitcoin
Now, the size of Bitcoin is equivalent to that of a large blue chip. Large investment funds are needed to drive Bitcoin to outperform the stock market index. To outperform the index in the long run, Bitcoin needs long-term favorable expectations. Bitcoin is not like stocks that have clear expectations from analyst reports. A favorable situation can be easily digested and cannot be maintained long. It cannot continue to appear. Ultimately, the game between longs and shorts determines the rise and fall, making its price approach the cost, the bottom of computing power. Long-term lingering at the bottom indicates that what is left is investment funds.
11. Bitcoin is highly volatile, so newcomers should not add leverage
It is very different from the stock market and foreign exchange market. Exchanges that do not charge handling fees rely on lending and self-operation.
12. What are the positive factors for the rise of Bitcoin
Bitcoin differs from the stock market in a few positive ways. In the macro aspect, there are positive legal and policy factors, including the Federal Reserve’s movements. In the micro aspect, there are positive factors for improved usability. Similarly, negative factors adjust much faster than the stock market’s. Therefore, the short-term risk is much greater than the stock market’s.
13. Unique indicators for observing the rise of Bitcoin and blockchain
We cannot know how much funds are in the stock and foreign exchange markets. The funds of blockchain are transparent. The increase in the market value of the three major stablecoins is the inflow of outside funds. When there is an inflow of funds, the coin will rise. There should be a corresponding relationship between the coin price and the inflow of funds. There must be a corresponding relationship between the trading volume of Bitcoin, Ethereum, and stablecoins. There is a corresponding relationship between the market value of stablecoins and their trading volume. The outflow of stablecoins is a lagging indicator. Observing the ratio of blockchain market value to stablecoin market value is also a short-term judgment indicator.
Now, there is another spot ETF indicator, and ETF funds are also channels for the inflow and outflow of funds.
14. The viewpoints of evaluating the stock market are not suitable for assessing Bitcoin
Stocks represent the equity of enterprises. Stock investment involves the investment of productive materials and can generate profits. Bitcoin is a commodity. Its value depends on supply and demand, and the cost price is the bottom of computing power. Cost is different from market value, which depends on demand. The same air ticket has different prices at other times. This is the difference between commodities and stocks.
15. The technical indicators of the stock market are suitable for Bitcoin
The stock market has very mature statistical indicators, such as moving averages, Bollinger Bands, etc. These indicators are suitable for both short-term and long-term use. They may not be suitable for small coins in the blockchain, but they must apply to Bitcoin. Generally speaking, these indicators are of reference significance under calm news.
16. All pure mathematical methods are unreliable in predicting Bitcoin
Plan B’s pure mathematical prediction cannot be used for Bitcoin. It is necessary to analyze the data according to various indicators and news and apply the methods of stock market analysts. Still, it is impossible to make a clear valuation.
Metcalfe’s Law is often used in the valuation of Bitcoin: “The value of the network is proportional to the square of the number of users connected to the network.” If this formula is true, then the growth of Bitcoin is exponential, which is also the current valuation method for Bitcoin. It is correct so far. However, the greater the value, the more funds must be promoted. How can we ensure that the funds can grow exponentially? In my prediction, starting from the fourth cycle, the exponential valuation will be broken, so I predicted arithmetic growth. See the natural growth curve of Bitcoin.
17. The premium of Bitcoin should be higher than gold
The average cost of gold is $1,000 per ounce, and the current price is around $2,000. Corresponding to the price of Bitcoin, it should be around $40,000 in 2023. Due to the small size of Bitcoin and its growth period, it is normal for the premium to be higher than gold.
Now, in 2024, the cost of Bitcoin is 50,000, and the price of gold is 2,500. Compared with gold, it should be 125,000. If the premium exceeds gold, it will be reasonable to reach 160,000. Why can’t it come at this price? It’s simple: there is insufficient demand.
18. Gold and Nasdaq index are the comparison objects of Bitcoin
Prices should exist for comparison, which is the price comparison effect. The price of Bitcoin is high or low; one refers to its historical price, and the second refers to the selection of relevant comparison objects. The key is whether the comparison object is correct. Bitcoin and gold are comparable reference objects. They are both commodities with similar characteristics. The correlation between Bitcoin and the rise and fall of US stocks has become increasingly higher in the past one or two years. As we analyzed in the previous article, Bitcoin is currently a lagging stock market. The stock market dares not rise to a high point, and Bitcoin has fallen too much. The price comparison effect determines its rise.
19. Look at Satoshi Nakamoto for the long term, and you can do whatever you want for the short term
Satoshi Nakamoto is equivalent to the “target” of Bitcoin, and the stock market attaches great importance to the target movements. The sale of shares by the controlling shareholder is often understood as bad news. Bitcoin has no “performance” and is theoretically unrelated to the “major shareholder”. However, Satoshi Nakamoto disappeared and never appeared again. No matter how often Bitcoin has risen and fallen, he has remained unmoved. As a long-term investor, following Satoshi Nakamoto is at least at the level of Satoshi Nakamoto.
20. Bitcoin is suitable for diversified investment configuration
The future of Bitcoin is promising, but the uncertainty is high. It is reasonable to use it as an asset configuration. It is unreasonable to place a heavy bet.
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