Below is a distribution chart of the multiple of the bitcoin price over the 200-day moving average. If a person decides to allocate a small portion of their portfolio to Bitcoin, this tool is intended to help people understand their emotions and corresponding probabilities of various price multiples (from a historical context). The charts and following information is not telling you to buy or sell Bitcoin. Bitcoin is insanely volatile. The charts do not suggest future results will be the same as the past. Please note, some suggest the long-term value of Bitcoin is high (in excess of $100,000 per Bitcoin), but there are also others that say Bitcoin is a mania and will be deeply regulated by the government if it is allowed to get too large. Either way, this page is simply a study to understand the probabilities of price multiples and what is normal and abnormal levels (from a historical context).
LAST UPDATE: 5 February 2018 (4:00 PM EST)
The 200 Day Moving Average is: $6858
The average Mayer Multiple is 1.47 for the history of Bitcoin.
The multiple on 5 February 2018 is 1.00X. A higher multiple has historically happened 75% of the time. A price less than $16461 would put the Mayer Multiple below 2.4X on 5 February 2018. A price of $10145 would put the price on the average multiple of 1.47X. The BTC price when this calculation was last conducted was $7000 USD.
The Mayer Multiple Since the Inception of Bitcoin
Please note: Bitcoin is not normally distributed. As a result, a typical Standard Deviation model is not accurate when talking about probabilities. With that said, this is the only model we can use to try and characterize normal and abnormal behavior. If you don’t like the use of this model, contact your college statistics teacher and he can help you invest in only absolute scenarios. Regardless of our distaste for academia, this model does have limitations and might not be the best way to represent the bitcoin price!
The chart below was determined by a simulation. The simulation assumed a person had $100 to invest in Bitcoin everyday since inception. There was only 1 control variable – the Mayer Multiple. If the price was < x Mayer Multiple, then the individual would buy $100 worth of BTC. If the price was >= x Mayer Multiple, the person would accumulate fiat until the price dropped back below x. The various x multiples that were tested are listed on the x axis below. When the simulation was run for various Mayer Multiples, it produced various returns (displayed in BTC on the y axis of the chart below). The chart demonstrates that anything over a Mayer Multiple of 2.4X failed to produce better results. When a multiple was selected below 2.4X, the BTC buyer got dramatically worse results. But, it’s very important to note that a new entrant buying below a 2.4X threshold would have an easier time emotionally during the first few quarters of ownership. Please note, every time the Mayer Multiple has gone above the 2.4X line, it has returned below 1.5X. In our simulation, we did not hold cash until reaching 1.5X (instead, the model simply purchased more BTC once below the 2.4X threshold). If the simulation would have waited for repurchase below 1.5X (after movement above 2.4X was achieved), the results would have likely been better than depicted below. This, however, may or many not be indicative of how the market might perform in the future, so those enhanced results were not displayed.
The Intrinsic Value and Networking Effect
The graph below shows how the value of Bitcoin might increase exponentially. The graph is derived from Metcalfe’s law that states that the value of a telecommunications network (fax machines, telephones, etc.) is proportional to the square of the number of connected users of the system. Companies like Facebook and Tencent showed that Metcalfe’s law, originally presented in 1980, held for both.
94% of the price movements from 2013-2017 has been explained by this law.
The Investor’s Podcast is the leading global investment podcast with 15 million+ downloads and counting. Every week, we cover a wide range of the hottest topics in the financial world. Make sure to listen to our most popular Bitcoin podcast episodes below.
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TIP160: Bitcoin Mastermind Discussion w/ Charlie Lee and Tuur Demeester
In this episode, we have an in-depth discussion about Bitcoin and upcoming changes to the protocol. Before we have this mastermind discussion with Charlie Lee and Tuur Demeester, Preston provides a monologue on the importance of understanding cryptocurrencies. Our two guests are some of the biggest names in the space. Charlie Lee is the founder of LiteCoin which is a digital cryptocurrency with a market capitalization of $3 billion dollars. Tuur Demeester is one of the first crypto writers and invested in Bitcoin when it was only $2 a coin.
In this episode, you’ll learn:
- Why Central Banks are manipulating markets and why Bitcoin is important
- What is Segwit 2X
- What is the lightning network
- What is an atomic swap
- What capabilities will be important for bitcoin in the future
- What the future price of bitcoin might be worth
TIP145: Bitcoin vs. Ethereum w/ Tuur Demeester
Since the last time The Investors Podcast covered cryptocurrencies in 2015, the price of Bitcoin has increased by over 1000%. Additionally, other competitive blockchain technologies like Ethereum have emerged. During this week’s episode, Preston and Stig talk to leading crypto-expert, Tuur Demeester. Tuur is a world-renown economist and investor that focuses on Bitcoin and other blockchain technologies. During the discussion, Tuur explains some of his opinions on why some technologies and protocols are more advantageous and secure than others.
Within the last five years, numerous billionaires have suggested that digital currencies are going to be the next big thing. For example, Bill Gates, Google’s Eric Schmidt, Peter Thiel, Richard Branson, and Patrick Byrne. Below are a few video’s highlighting these individuals comments on block chain technology.
At the start of the episode, we play 15 minutes from our previous podcast on Bitcoin so people can understand the basics of blockchain technology. After that quick recap, we play our full interview with Tuur.
In this episode, you’ll learn:
- What the fundamental value of Bitcoin is
- Why Bitcoin might continue to be the dominant cryptocurrency
- Why Bitcoin could split into multiple currencies
- The main differences between Bitcoin and Ethereum
TIP30: What in the World is Bitcoin?
This episode provides an overview of Preston and Stig’s discussion of the book, The Age of Cryptocurrency, and whether or not you can capitalize on the new phenomenon. This episode was recorded in the spring of 2016.
In this episode, you’ll learn:
- What Cryptocurrency and bitcoin is
- Why trust is the key for cryptocurrency
- Whether or not you should invest in bitcoin
As often as they can, Preston, Stig, and Pierre meet up Monday nights at 9:30PM EST to discuss Bitcoin and take questions from the audience. The conversation is streamed live on YouTube.
ASK AND LEARN ABOUT BITCOIN
18 December 2017: Crypto Currencies – CME Derivatives, Mayer Multiple, Bitcoin & More
29 November 2017: Bitcoin Mayer Multiple
27 November 2017: Q&A with Peirre Rochard
© TIP Academy content is for educational purposes only. The calculators, videos, recommendations and general investment ideas are not to be actioned with real money. Contact a professional and certified financial advisor before making any financial decisions. Preston Pysh and Stig Brodersen are not professional money managers or financial advisors. The Investor’s Podcast and parent companies that own The Investor’s Podcast are not responsible for financial decisions made from using this course or the tools provided in the course.