Hype is an Asset Class

The big question with cryptocurrencies is straightforward: what are you buying, exactly?

The most widely discussed approach to an answer is an ersatz equation of exchange, where the total value of all money in circulation is divided by the total number of bitcoins. This produces some funny results. My favorite was published at the height of the bubble on 25 December 2017. The author wrote: "I value 1 Bitcoin at approximately $4 million per coin. I believe this estimate to be conservative."

There are more sophisticated approaches, but I'm not sure they reach a more useful conclusion.

My preference is to value these assets in a way that's similar to accounting goodwill, which somewhat gives away that I'm not so inclined to put them in my own portfolio. 

With that said, I've learned a lot by watching the assets and their context over the last few years. I had the opportunity to present my collected thoughts in the closing keynote at CFA Society New York's 2nd Annual Blockchain Conference.

It was so much fun.

I pasted my favorite chart from the deck below, which compares the total dollar value traded on various exchanges over 30 day periods. The ones with red arrows are trading crypto, the rest are trading equities. The full video is up on CFA NY's website, and you can watch it by clicking here.

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