Why BCH has 1000x the upside potential of BTC
The arrival of futures trading on CBOE has proved to be somewhat of a damp squib with the predictions of both sides (that futures trading would bring large amounts of institutional buying / that futures trading would result in bitcoin being naked shorted to death) proving unfounded. You can read more about bitcoin futures trading here. The only notable event was that CBOE’s public-facing Web site crashed on launch, indicating a lot of interest. The lack of shorters would seem to put the ‘bubble’ theory to bed as they failed to put their money where their mouths were.
Next week futures trading on CME will go live. Some brokers are refusing to allow their clients to trade bitcoin futures, others will only allow them to make bets on a higher price (go ‘long’). Anyone buying or selling bitcoin futures has seen the price go up and down. I think all we can say is bitcoin is high-risk; high-reward (if you get it right) and high losses if you get it wrong.
One of the problems that traders have is that there is no agreed way to value a bitcoin and the old models do not seem to work. As it has many of the properties of gold, it was thought bitcoin might go up and down with gold as a store of value and refuge in times of economic uncertainty. However it appears that the bitcoin price and the gold price are not correlated.
Since bitcoin does not pay any rent (like dividends) it is difficult to value it in the same way as you might value a stock. With a company you can look at the balance sheet and underlying cash flows to arrive at a fair price for a share. Thinking of a bitcoin like a share is an example of old-style modelling.
Despite extensive analysis, it has been impossible to correlate the price of bitcoin to anything, which makes it very useful as part of a portfolio. This is because the goal of most portfolio managers is to put together a basket of assets which will go up steadily ‘no matter what’. Broadly speaking if you had stocks and precious metals then you knew that if one was going down, the other one was going up and in the long term, both went up. But lately, gold has spluttered, which means that both stocks and gold could go down together. What is needed is an asset class that doesn’t go up and down with stocks or precious metals and the answer is bitcoin.
In the rest of this article I will explain how Bitcoin should correctly be valued and justify my claim that Bitcoin Cash (BCH) has over 1000x the potential of Bitcoin Core.
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