Q2 2018 Market Review & Outlook
Comment of the Day

September 10 2018

Commentary by Eoin Treacy

Q2 2018 Market Review & Outlook

Thanks to a subscriber for this report from Morgan Creek Capital. Here is a section on blockchain:

With that kind of volatility being the norm in the current Bitcoin environment, we repeat what we wrote in January (and have tweeted very often) that it is important “to remember about Bitcoin is that the daily price is not really important, what is important is gaining ownership of the network as it develops. Think of it like an iPhone; when there was only one, the network had no value; two phones, still no value; a million phones, meaningful value; ten billion phones, huge value. The same applies to the network value of Bitcoin.” Most importantly, as millions of global users continue to buy into the Bitcoin network over time (remember U.S. is only 10% of the activity), the network value will continue to grow toward the logarithmic non-linear regression model target. New technological advances like the Lightning Network could speed adoption rates and raise the slope of the curve, but the Parabolic Growth Model points to network values of “$22k by the end of 2018, $41k by the end of 2019, $75k by the end of 2020 and $100k by the middle of 2021.” Last year we said that we could see Bitcoin reach “Gold Equivalence” (market cap of $8.4 trillion) within a decade and that would take the BTC price to $400k. Reviewing the network value model, we have since revised the forecast a bit and can see $250k by the middle of 2022 and $500k by the end of 2024. We tweeted this timetable in April and there was a little commotion about the shift, but we recently spoke with a crypto writer for the Street.com and they did an article on the entire model and thesis for the price movements that has gone a little viral and was even translated into many languages around the world (my favorite has been seeing it in Polish and knowing that would have made my Grandma Dombroski proud).

One thing to be very clear on here is that we are not making any absolute predictions about Bitcoin and we are definitely not making any promises to do something rash like Mr. McAfee has done (saying he will eat a sensitive body part live on the internet if BTC doesn’t hit $1 million by a certain date), but rather pointing out some very sound mathematics for how a network grows and how the value of that network could rise as user adoption increases.

Eoin Treacy's view

Here is a link to the full report.

There are three things you can see on a chart. What you want to see, what you think you are going to see and what is there. If we ignore price, then we are setting ourselves up for a fall into ideology or self-delusion, both of which can be deleterious to one’s wealth. The price contains all the information that is important to people right now.

I have said it before and I’ll say it again. I think Bitcoin is to blockchain what Netscape was to the internet. Netscape was one of the originators of what we now think of as our internet experience but the company no longer exists and the remnants of its search engine are now the free to download Firefox browser. Blockchain might well expand and is quite likely to do so as technology improves and the network’s many obstacles are dealt with in a piecemeal manner. However, that does not mean bitcoin will be the best way to benefit from it.

The bitcoin price has held a progression of lower rally highs since early this year and is back testing its lows near $6000. It is going to need to bounce in a dynamic manner if the support building hypothesis is to remain credible.

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