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If a company’s stock is in free fall, it won’t usually trade that far below its earnings. People wont sell a stock that’s expected to earn them money for much b

If a company’s stock is in free fall, it won’t usually trade that far below its earnings. People wont sell a stock that’s expected to earn them money for much below that amount unless they think the company will collapse before those earnings come back. There is probably a similar point for Bitcoin, where the price actually matches the demand for its utility as a currency. AFAIK it never got that popular for that purpose, so I think the theoretical floor is extremely low. We’re watching it rapidly lose the value driven by demand for speculating on it.

chillacy 4y ago
I assume you mean book value? Since most stocks trade for far less earnings, we have an a tire concept of revenue multiples to account for that.
- cormacrelf 4y ago
  Yes. I was simplifying, in some circumstances stock price drops go down to the bare net asset value. Companies have assets and liabilities, and the shares shouldn’t drop much below the net value of those assets because even if they declare bankruptcy, the shareholders get the proceeds of liquidation after the creditors. You expect a distribution of those funds, and so shares don’t drop to zero unless a company is deep in debt. When earnings projections are inflated and then drop back to earth, or some economic news means the projections are no longer good, then shares drop to an estimate of that base asset value + the new, lower earnings potential. That’s your typical stock price drop story. Because Bitcoin is not a company publishing reliable earnings reports etc, everyone is currently guessing at the amount of value attributable to the utility demand value I was referring to, compared to the speculative value. If people tell you they know where the bottom is, they are probably completely bullshitting based on analysis equivalent to drawing lines on the stock chart in MS Paint.

chillacy 4y ago

I assume you mean book value? Since most stocks trade for far less earnings, we have an a tire concept of revenue multiples to account for that.

cormacrelf 4y ago
Yes. I was simplifying, in some circumstances stock price drops go down to the bare net asset value. Companies have assets and liabilities, and the shares shouldn’t drop much below the net value of those assets because even if they declare bankruptcy, the shareholders get the proceeds of liquidation after the creditors. You expect a distribution of those funds, and so shares don’t drop to zero unless a company is deep in debt. When earnings projections are inflated and then drop back to earth, or some economic news means the projections are no longer good, then shares drop to an estimate of that base asset value + the new, lower earnings potential. That’s your typical stock price drop story. Because Bitcoin is not a company publishing reliable earnings reports etc, everyone is currently guessing at the amount of value attributable to the utility demand value I was referring to, compared to the speculative value. If people tell you they know where the bottom is, they are probably completely bullshitting based on analysis equivalent to drawing lines on the stock chart in MS Paint.