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I was pretty sure $6-7k was the floor for BTC, and it’s interesting to see a high-profile fund manager made effectively the same, expensive mistake. The biggest

I was pretty sure $6-7k was the floor for BTC, and it’s interesting to see a high-profile fund manager made effectively the same, expensive mistake. The biggest surprise for me, though, was ETH, which given its better fundamentals, I had thought would be where the market went after Bitcoin popped – and yet, it was not only dragged down, but crushed even harder than BTC.

elhudy 8y ago
What "fundamentals" exist for Eth that allow it to be valued at a specific price point? Eth has no earnings, no assets, and no liabilities. Its intrinsic value is close to 0. It could be totally wiped off the planet tommorow and almost nobody besides crypto traders would care. Crypto trading should be based on technical analysis not "fundamentals".
- nostrademons 8y ago
  Adoption and projects using it. Like any currency, ETH becomes more valuable when you can spend it on more things. It's the base currency for a whole infrastructure of distributed trust & settlement; if useful economic activity occurs on top of that infrastructure, ETH gains in value proportionally.
  - elhudy 8y ago
    Ok, but the whole idea behind fundamental analysis is that you generate a specific value of worth based on your analysis. So what formula are you using to calculate a price point for Eth based on "adoption and projects using it"? Are you tracking all projects using it, and assigning it a dollar value based on a per project usage and cross-checking that against the number of ways you can use it? Or are you just guessing? Because if you're just guessing, that's not a fundamental analysis.
    - nostrademons 8y ago
      I actually am, to most of those points. I'm indexing every forum & blog on the web, then cross-referencing it with a big long list of crypto projects, then using that to infer which projects have an active, involved, growing community and which are scams or dead. Sentiment, activity, and viral mentions aren't a perfect proxy for adoption, but it's pretty close, and a lot more robust data source than technical analysis or previous prices, which by their nature will always be a lagging indicator. Still in closed beta with a very limited set of testers - I've been working on a lot of the kinks in the data acquisition, which as you could imagine is a little tricky. If you want to get on the wait list, signup is here: http://www.cryptolazza.com/ http://www.cryptolazza.com/
      - elhudy 8y ago
        That's fair; props on all of the effort you've put into that! I'd imagine one of the toughest challenges is subtracting the volatile "layman demand" and gamblers to get to that fundamental value derived from actual users.
        nostrademons 8y ago
        The nice thing about indexing the whole web is that you also have a complete per-author picture of everything they've written. Shills often post the exact same message on many different sites, or talk exclusively about one project and nothing else. Gamblers & laymen tend to pop up abruptly when a project gets hot, and then quickly either disappear or move on to the next hot thing. When a veteran user with a reputation for detailed, often-quoted posts starts talking about a particular project, though, and keeps talking about it, usually there's something real there.
      - blackstrips 8y ago
        What are the chances those projects will generate income and pay for ETH? Can those projects work without a blockchain? Would it be cheaper to just handle stuff with (digital) signatures and old fashion contracts?
        8y ago
nostrademons 8y ago
It was interesting to watch the crypto subreddits and see so many people make the same mistake. I was surprised that $6K held for so long, because if $6K really was the bottom, it would've been a pretty shallow drop from a very steep bubble. That's only 2/3 down, and it was the point Bitcoin hit in Oct 2017. Bitcoin was < $1k at the start of 2017. Any reasonable rate of return would put its price at under $2k if you ignore the bubble and focus only on fundamental metrics. Plus bubble busts tend to overshoot fair market value, where the underlying asset actually trades at a bargain because so many people got burned buying at the top. The ETH drop is fairly easy to explain - it was the base asset for a very interesting double-pyramid-scheme on the way up, which meant that that leverage works in reverse on the way down. The ICO boom worked because many of the people investing in ICOs had bought their ETH for pennies and already recouped their costs; throwing $40M into a shitcoin makes a lot more rational sense when that ETH actually cost about $4K in real money, and the factor of 10,000 difference is the price appreciation of the asset you're putting in. That led to eye-popping dollar valuations for many of these companies (even though they were actually raising in ETH), which brought more newbies into the Ethereum world, which pushed the price even higher, which meant later ICOs were raising even more in dollar terms, even though the actual dollar amounts traded were tiny. On the way down, this cycle works in reverse. Those ICOs don't actually hold $40M in a company bank account; they hold 33K ETH which was worth $40M at the peak. Now that ETH is down to $94, they hold more like $3M, and they're getting scared about being able to pay salaries. So every ICO that still holds ETH is trying to liquidate it for dollars, but they're fighting over the much-reduced pot of money that is coming into crypto now, which drives the price down every time somebody wants to sell. Personally I still think we're not at the bottom yet (for either ETH or BTC), but we may be getting close. We're at the bottom when companies start going bankrupt, Solidity engineers start getting laid off, and people start going to jail. Assuming it's not all smoke and mirrors and some useful infrastructure was actually built, it'll be the buying opportunity of the lifetime then, because everyone will think this whole crypto fad will be totally over and you'll be able to buy up that infrastructure at really cheap prices.
- solveit 8y ago
  Re: your last paragraph But if everyone thinks that (and most people who think crypto isn't all shit do think that), the bottom will be a lot softer than what you describe (modulo people going to jail, I think this is mostly independent of the value of crypto). It's the efficient market hypothesis all over again.

elhudy 8y ago

What "fundamentals" exist for Eth that allow it to be valued at a specific price point? Eth has no earnings, no assets, and no liabilities. Its intrinsic value is close to 0. It could be totally wiped off the planet tommorow and almost nobody besides crypto traders would care. Crypto trading should be based on technical analysis not "fundamentals".

nostrademons 8y ago
Adoption and projects using it. Like any currency, ETH becomes more valuable when you can spend it on more things. It's the base currency for a whole infrastructure of distributed trust & settlement; if useful economic activity occurs on top of that infrastructure, ETH gains in value proportionally.
- elhudy 8y ago
  Ok, but the whole idea behind fundamental analysis is that you generate a specific value of worth based on your analysis. So what formula are you using to calculate a price point for Eth based on "adoption and projects using it"? Are you tracking all projects using it, and assigning it a dollar value based on a per project usage and cross-checking that against the number of ways you can use it? Or are you just guessing? Because if you're just guessing, that's not a fundamental analysis.
  - nostrademons 8y ago
    I actually am, to most of those points. I'm indexing every forum & blog on the web, then cross-referencing it with a big long list of crypto projects, then using that to infer which projects have an active, involved, growing community and which are scams or dead. Sentiment, activity, and viral mentions aren't a perfect proxy for adoption, but it's pretty close, and a lot more robust data source than technical analysis or previous prices, which by their nature will always be a lagging indicator. Still in closed beta with a very limited set of testers - I've been working on a lot of the kinks in the data acquisition, which as you could imagine is a little tricky. If you want to get on the wait list, signup is here: http://www.cryptolazza.com/ http://www.cryptolazza.com/
    - elhudy 8y ago
      That's fair; props on all of the effort you've put into that! I'd imagine one of the toughest challenges is subtracting the volatile "layman demand" and gamblers to get to that fundamental value derived from actual users.
      - nostrademons 8y ago
        The nice thing about indexing the whole web is that you also have a complete per-author picture of everything they've written. Shills often post the exact same message on many different sites, or talk exclusively about one project and nothing else. Gamblers & laymen tend to pop up abruptly when a project gets hot, and then quickly either disappear or move on to the next hot thing. When a veteran user with a reputation for detailed, often-quoted posts starts talking about a particular project, though, and keeps talking about it, usually there's something real there.
    - blackstrips 8y ago
      What are the chances those projects will generate income and pay for ETH? Can those projects work without a blockchain? Would it be cheaper to just handle stuff with (digital) signatures and old fashion contracts?
      - 8y ago

nostrademons 8y ago

It was interesting to watch the crypto subreddits and see so many people make the same mistake. I was surprised that $6K held for so long, because if $6K really was the bottom, it would've been a pretty shallow drop from a very steep bubble. That's only 2/3 down, and it was the point Bitcoin hit in Oct 2017. Bitcoin was < $1k at the start of 2017. Any reasonable rate of return would put its price at under $2k if you ignore the bubble and focus only on fundamental metrics. Plus bubble busts tend to overshoot fair market value, where the underlying asset actually trades at a bargain because so many people got burned buying at the top. The ETH drop is fairly easy to explain - it was the base asset for a very interesting double-pyramid-scheme on the way up, which meant that that leverage works in reverse on the way down. The ICO boom worked because many of the people investing in ICOs had bought their ETH for pennies and already recouped their costs; throwing $40M into a shitcoin makes a lot more rational sense when that ETH actually cost about $4K in real money, and the factor of 10,000 difference is the price appreciation of the asset you're putting in. That led to eye-popping dollar valuations for many of these companies (even though they were actually raising in ETH), which brought more newbies into the Ethereum world, which pushed the price even higher, which meant later ICOs were raising even more in dollar terms, even though the actual dollar amounts traded were tiny. On the way down, this cycle works in reverse. Those ICOs don't actually hold $40M in a company bank account; they hold 33K ETH which was worth $40M at the peak. Now that ETH is down to $94, they hold more like $3M, and they're getting scared about being able to pay salaries. So every ICO that still holds ETH is trying to liquidate it for dollars, but they're fighting over the much-reduced pot of money that is coming into crypto now, which drives the price down every time somebody wants to sell. Personally I still think we're not at the bottom yet (for either ETH or BTC), but we may be getting close. We're at the bottom when companies start going bankrupt, Solidity engineers start getting laid off, and people start going to jail. Assuming it's not all smoke and mirrors and some useful infrastructure was actually built, it'll be the buying opportunity of the lifetime then, because everyone will think this whole crypto fad will be totally over and you'll be able to buy up that infrastructure at really cheap prices.

solveit 8y ago
Re: your last paragraph But if everyone thinks that (and most people who think crypto isn't all shit do think that), the bottom will be a lot softer than what you describe (modulo people going to jail, I think this is mostly independent of the value of crypto). It's the efficient market hypothesis all over again.