Specialising in Bitcoin, Gold and Digital Assets

ByteTree Asset Management

Investment Manager specialising in bitcoin, gold and digital assets

CEO, ByteTree Asset Management

Crypto

<p>It has long been my assumption that when the Web 2.0 (Google, Apple, Amazon, Facebook etc.) boom finally ends, Web 3.0 would take over (crypto). With the NASDAQ slumping (ByteTrend score 0/5 in US$) and Bitcoin showing resilience (3/5 in US$), could this be the moment?<br><br>Bitcoin has long been correlated with the tech sector and risky assets in general. There is no shame in that, provided the outcome is ultimately superior. In Q2 2022, it wasn’t. Despite high daily correlations, there were two notable falls when bitcoin fell harder than tech stocks, one in May (Terra Luna) and the other in June (Fed tightening).</p>
<h3>Q2 2022 Was Brutal for Bitcoin</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/307/718/original/image_673415523151667601900133.png?1667601901" class="editor-image img-responsive" data-smartkarma-image-id="307718"></figure>
<div class="content-caption">Source: Bloomberg</div>
<p>Starting in July, you get a sense of how closely bitcoin and NASDAQ have traded in this high correlation environment. But just as Bitcoin broke down in Q2, this time, it’s the NASDAQ in trouble. Better still; it is not a matter of Bitcoin falling less, it has managed to swim against the tide.&nbsp;</p>
<h3>Bitcoin Is Up While the NASDAQ Is Down</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/307/719/original/image_740992656161667601938852.png?1667601939" class="editor-image img-responsive" data-smartkarma-image-id="307719"></figure>
<div class="content-caption">Source: Bloomberg</div>
<p>All bubbles eventually burst. Bitcoin was overplayed last year but is no longer. We know that because Web 3.0 is real and the entire financial services industry holds precisely zero bitcoin, yet they all will at some point in the future.&nbsp;<br><br>The NASDAQ is still in a bubble, and here’s why. Apple is the world’s most valuable company ($2.2 trillion) and therefore the largest holding in the NASDAQ. It managed to trade on 3x sales in the dotcom bubble and 7x in 2007 when it was growing like a weed. Today it is 6x, yet it is a mature company with much lower expected growth.<br><br>Remember the iPod, the launch of the iPhone, and their cool desktops? They still have great products, but the high valuation in 2007 was justified because a ton of growth was coming. Today, Apple trades close to that same price to sales multiple at a time when their best days are (very obviously) behind them.</p>
<h3>Elephants Don’t Gallop</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/307/720/original/image_172281770171667601971490.png?1667601972" class="editor-image img-responsive" data-smartkarma-image-id="307720"></figure>
<div class="content-caption">Source: Bloomberg</div>
<p>A good outcome over the next decade would be to avoid doing a Nokia, Ericsson, Blackberry, Palm, Sinclair, Amstrad, Sony and so on. Hardware isn’t an easy business (Apple calls itself a software company) to maintain high market share at high margins in perpetuity.&nbsp;<br><br>The bottom line is that the NASDAQ has many reasons to fall, not because it is no longer innovative, but simply because it is overvalued. Bubbles always burst in the end.<br><br>My favourite chart, Bitcoin in NASDAQ (BitDAQ), has perked up, and a four-month high will turn heads. Investors will look at their losses in tech and the emerging strength in crypto and act accordingly.&nbsp;</p>
<h3>BitDAQ Breaks Higher</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/307/721/original/image_598656658181667602002123.png?1667602003" class="editor-image img-responsive" data-smartkarma-image-id="307721"></figure>
<div class="content-caption">Source: Bloomberg</div>
<p>Let us not forget that BitDAQ has a post-2013 uptrend IRR of 58%. The big picture is that trend is still higher highs and lows, and so it could last for a few more years yet. Currently, bitcoin is oversold on this multi-year regression. I like this chart.</p>
<h3>BitDAQ Is Compelling in the Long-term</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/307/728/original/image_172222924191667605666352.png?1667605668" class="editor-image img-responsive" data-smartkarma-image-id="307728"></figure>
<div class="content-caption">Source: Bloomberg</div>

It has long been my assumption that when the Web 2.0 (Google, Apple, Amazon, Facebook etc.) boom finally ends, Web 3.0 would take over (crypto). With the NASDAQ slumping (ByteTrend score 0/5 in US$) and Bitcoin showing resilience (3/5 in US$), could this be the moment?  Bitcoin has long been correlated with the tech sector and risky assets in general. There is no shame in that, provided the outcome is ultimately superior. In Q2 2022, it wasn’t. Despite high daily correlations, there were two notable falls when bitcoin fell harder than tech stocks, one in May (Terra Luna) and the other in June (Fed tightening).
Q2 2022 Was Brutal for Bitcoin

Source: Bloomberg
Starting in July, you get a sense of how closely bitcoin and NASDAQ have traded in this high correlation environment. But just as Bitcoin broke down in Q2, this time, it’s the NASDAQ in trouble. Better still; it is not a matter of Bitcoin falling less, it has managed to swim against the tide.&nbsp;
Bitcoin Is Up While the NASDAQ Is Down

Source: Bloomberg
All bubbles eventually burst. Bitcoin was overplayed last year but is no longer. We know that because Web 3.0 is real and the entire financial services industry holds precisely zero bitcoin, yet they all will at some point in the future.&nbsp;  The NASDAQ is still in a bubble, and here’s why. Apple is the world’s most valuable company ($2.2 trillion) and therefore the largest holding in the NASDAQ. It managed to trade on 3x sales in the dotcom bubble and 7x in 2007 when it was growing like a weed. Today it is 6x, yet it is a mature company with much lower expected growth.  Remember the iPod, the launch of the iPhone, and their cool desktops? They still have great products, but the high valuation in 2007 was justified because a ton of growth was coming. Today, Apple trades close to that same price to sales multiple at a time when their best days are (very obviously) behind them.
Elephants Don’t Gallop

Source: Bloomberg
A good outcome over the next decade would be to avoid doing a Nokia, Ericsson, Blackberry, Palm, Sinclair, Amstrad, Sony and so on. Hardware isn’t an easy business (Apple calls itself a software company) to maintain high market share at high margins in perpetuity.&nbsp;  The bottom line is that the NASDAQ has many reasons to fall, not because it is no longer innovative, but simply because it is overvalued. Bubbles always burst in the end.  My favourite chart, Bitcoin in NASDAQ (BitDAQ), has perked up, and a four-month high will turn heads. Investors will look at their losses in tech and the emerging strength in crypto and act accordingly.&nbsp;
BitDAQ Breaks Higher

Source: Bloomberg
Let us not forget that BitDAQ has a post-2013 uptrend IRR of 58%. The big picture is that trend is still higher highs and lows, and so it could last for a few more years yet. Currently, bitcoin is oversold on this multi-year regression. I like this chart.
BitDAQ Is Compelling in the Long-term

Source: Bloomberg

Bitcoin

Bitcoin Overtakes NASDAQ