I see a lot of people coming into the space and not knowing where to start. It’s understandable and we have all been their before. Truth is, there is no roadmap or guide for this new asset class. Universities are only beginning to offer courses and studies in this field. The Internet, likely has more to offer on cryptocurrencies than any textbook.

The easiest place to start is bitcoin, but it’s also the hardest crypto to define. BTC is an investment for a working class American like myself, but it’s many other things to other people. You’ll find some model crypto like stocks, metals, commodities, tech networks or currencies. The issue I have is when we focus on only one use, at the expense of the others. None of those models capture everything bitcoin does or is, in totality.

You start with BTC because every other crypto’s price moves with it, 95% of the time. By correlation, BSV is the least similar to BTC. BSV maybe the best crypto as an anti BTC hedge because of that. ETH and LTC show the strongest positive correlations with BTC, at times.

Where does Bitcoin get it’s value?

From it’s buyers (of course) and they are diverse, spread around the globe, big in numbers, and growing. The reasons they buy are as diverse as the regions buyers span. In the United States and Japan, BTC is speculative long term investment thought of like gold or stocks. In Venezuela, Zimbabwe, Argentina, Honk Kong and many other places facing hyper inflation, BTC is something else. It’s a store of value similar to gold, but easier to hide and spend. The BTC/$ chart might not be at all time high but the Argentina peso and Venezuelan bolivar are.

The demand is one side of the coin but BTC also differs from other assets in it’s limited supply. This scarcity means that newly minted BTC can be sold on to the market without much demand being removed. Supply inflation of BTC is preset and already close to falling below the FED’s 2% yearly goal for the dollar. At the next halving BTC’s supply inflation rate will fall to 1.8%

Supply and demand but what about valuation?

How can we value BTC now and going forward? Many ways, BTC is a network, innovative tech, traded like stocks, spent like currencies, and scarce like gold. You can take your pick but for now most buy BTC as a millennial safe haven against recession, future ecash, or store of value against inflation.

All of these treat BTC like a speculative egold with transparent mining. This makes it perfect for stock to flow valuations like the one introduced to me by Saifedean Ammous through Mr. Plan B.

Stock to flow with future supply cuts coded into the protocol, gives investors the ability to forecast with unique clarity. Gold’s future output isn’t set in stone, figuratively. Good luck predicting how many shares of stock a company can print. Even ICO’s have found ways to water down tokens and remove use cases after taking investors funds.

The halving is my guide for BTC, I’m a believer in that supply shock causing BTC greatest bull runs. I see the run up start 1–1.5 years before the halving and peak 1–1.5 years after. This is how I determine tight or loose I get with my orders. I expect altcoins to go up vs BTC at the end of the cycle when BTC’s peaks, a replay of 2017 in 2021. Fingers crossed we hit $200k next leg up.

My favorite crypto sources: Bitcointalk, Bitcoin subreddit, Cryptocurrency subreddit, Biz Board (NSFW)