Home Bitcoin News Bitcoin Is Trading at a 71% Premium but Could Still Go Higher: Charlie Morris

Bitcoin Is Trading at a 71% Premium but Could Still Go Higher: Charlie Morris

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  • Charlie Morris is the co-founder of crypto information supplier ByteTree and CIO of its asset administration arm.
  • He is a long-term bitcoin bull, however he is skeptical concerning the present “hype cycle” with bitcoin buying and selling at a 71% premium.
  • This is how his honest worth mannequin works and the way he is positioned for the fourth quarter.

As a veteran fund supervisor with 17 years of expertise operating a multi-asset portfolio at funding titan HSBC, Charlie Morris spent a variety of time searching for totally different and fascinating asset courses that might provide non-correlated returns.

Bitcoin was one of many property that caught Morris’s consideration again in 2013. 

However, at that time, it wasn’t fairly able to be neatly packaged into an investor’s portfolio, so Morris as a substitute targeted his consideration on the info behind the asset class. He co-founded ByteTree.com, an institutional crypto information supplier that gives buyers entry to a terminal with metrics to investigate the worth motion of bitcoin in addition to conventional commodities, like gold and silver.

Solely final 12 months, did Morris return to the thought of including bitcoin to buyers’ portfolios with the launch of ByteTree’s asset management arm, which provides publicity to 2 totally different crypto funds.

This timing was good. Bitcoin (BTC) surged 375% from November 2020 as adoption picked up amongst institutional invecstors, retail merchants and even international locations, comparable to El Salvador, the place it’s authorized tender now.

Simply this week bitcoin reached an all-time excessive of around $66,000 on the again of the launch of the first US bitcoin futures exchange-traded fund, which already has $1 billion assets under management days after launching.

The bitcoin ‘hype cycle’

Whereas the ETF launch has pushed a burst bullish value motion, Morris shouldn’t be satisfied it is going to final.

He is notably involved concerning the ETF sustaining the momentum, primarily based on the efficiency of commodity futures ETFs prior to now.

“Over time, they only massively underperformed the underlying and you are going to see the identical factor right here,” Morris stated. “Now sadly, for bitcoin futures, the extra demand there may be for bitcoin, the more severe the roll yield will get. On the prime of hype cycles, you get probably the most underperformance.”

Insider lately spoke to several crypto investors and ETF experts who made similar points. Morris draws comparisons to the USO ETF, which tracks WTI crude oil futures and has underperformed relative to the worth of oil over the long-term.

“Quite a lot of these items change into efficient buying and selling autos the place within the quick time period, you do not care concerning the slippage, right here and there, for days, weeks, months, they do not actually discover,” Morris stated. “However it’s if you’re there for years, then it actually begins to impinge on efficiency.”

Even earlier than the launch of the futures ETF, Morris was bearish on the sentiment and value motion surrounding bitcoin. On the Token2049 conference in London, on October 8, he stated bitcoin was “overpriced” and worth no more than $28,000 primarily based on ByteTree’s fair value model.

The mannequin calculates honest worth primarily based on network value to transaction ratio (NVT-BT) and on-chain information to create a good value valuation. Morris compares NVT-BT to the traditional price-to-sales ratio in fairness evaluation as one of the vital direct measures in figuring out honest worth.

Leveraging 12-week transaction information, on October 22, the present honest worth for bitcoin is round $36,000, which means it is buying and selling at a premium of round 71%, he stated.

ByteTree fair value model on October 22

ByteTree honest worth mannequin on October 22


At present, round $50 billion is altering fingers every week on the blockchain, Morris stated. 

“We have now obtained a value the place you’d usually see about $70 or $80 billion value of bitcoin altering fingers, and now you’ve got obtained $50 billion,” Morris stated. “Since I spoke at that convention, that hole has closed by $10 million, so the chain is selecting up, however that is positively buying and selling on narrative in the mean time.”

Regardless of his skepticism over the quick time period, Morris stays long-term bullish on bitcoin. He believes merely that the market stays forward of occasions proper now.

“We have had bitcoin beneath honest worth on 4 events within the final 12 months, however simply on no event since June,” Morris stated.

Bitcoin might preserve going up

2021 has change into the 12 months of the bitcoin narrative, Morris stated. Nevertheless, this is not all the way down to bitcoin alone. Morris believes that is pushed by the broader bubble seen throughout a variety of asset courses.

“Folks simply get carried away about money flows in a zero charge world,” Morris stated. “You’ve got obtained this huge bubble in just about all the things, in bonds and in equities and so forth. Now you’ve got obtained the inflation coming via. And so till they put the brakes on, then I feel the bubble is in lots of asset courses, not simply crypto.”

With bitcoin now breaking out to new document highs, Morris expects this might entice some huge cash to the house with the potential to go even greater.

“At any time when bitcoin has gotten excited, it tends to be within the fourth quarter for no matter motive,” Morris stated. “2018 was distinctive, however most years, the fourth quarter is fairly sturdy and there is fairly sturdy seasonality round that.”

Morris focuses on the inverse relationship between gold and bitcoin and provides a method that rebalances between gold. Usually gold performs nicely within the first and third quarters of the 12 months. Whereas bitcoin performs nicely within the second and fourth quarter, he stated.

Morris’ general fund is totally invested in crypto proper now with an 80% allocation to bitcoin and a 20% allocation to ethereum. 

“I am naturally skeptical of hype cycles, I am not having fun with bitcoin in 2021 practically as a lot as I did in 2020,” Morris stated. But his long-term thesis retains him invested within the asset class.

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