Currently, the 200 day moving average (DMA) is $9455 and the current Mayer Multiple is 0.73 (source: https://twitter.com/tipmayermultple?lang=en). The Mayer Multiple has historically been higher more than 90% of the time throughout bitcoin's history.
An asset that appreciates in dollar terms over time will, on average, trade above the 200 DMA. For those who believe that bitcoin's monetary properties are vastly superior to those of fiat and the dollar, today's price seems like quite the bargain.
While bitcoin's history is relatively brief, it is worth our time to look at the only other extended period of time when the Mayer Multiple was at current levels.
Bitcoin sprang into existence in January of 2009 and never had a price above $1 until early in 2011. The 200 DMA then didn't really start to have any meaning then until 2012. The following graph hasn't been updated since February 5, 2018:
source: https://www.theinvestorspodcast.com/bitcoin-mayer-multiple/
Since publication, the Mayer Multiple has continued to fall. We can also see that the Mayer Multiple traded below 1.0 between early 2014 and the middle of 2015.
So, what was happening in the bitcoin world back then? In short, it seemed like the end of bitcoin to many. Silk Road, the online drug emporium, had been seized by the US government and its operator arrested. Also, Mt. Gox, at one time the largest bitcoin exchange went bankrupt.
Bitcoin skeptics claimed bitcoin was only good for illicit purposes and the Mt.Gox' collapse made it difficult to establish a real bitcoin price. The real problem for bitcoin however, was the overhang of coins for sale. The US government confiscated 144,000 bitcoins in the Silk Road case and auctioned them off between June of 2014 and November of 2015.
The government then had for sale about one percent of all bitcoins in circulation. Given that prices are set at the margin and bitcoin holders are very short term in nature, bitcoin's price was under pressure while the overhang existed.
Today, the Mt. Gox trustee has sold 40k bitcoins and currently has a little less than one percent of all bitcoins available for liquidation. To me, the parallel of today's price pressure to the Silk Road case is obvious.
What is different however, is that bitcoin is far more entrenched today than in 2014 and its main use case, an escape from central banker dishonesty, is now well established. 2014-15 was an opportune time to acquire bitcoin and I suspect history will repeat itself in time.
Notice: This does not constitute investment advice. I cannot know your financial situation and whether these discussions are therefore, relevant.
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