That “40% discount” you’ve been reading about Bitcoin? It’s a dangerous siren song, leading you straight onto the rocks. Everyone's hyper-focused on energy expenditure models, especially after the halving, and shouting about Bitcoin's "intrinsic value" being way up at $130,000. Here's the brutal truth: believing that narrative is a financial gamble you can't afford to lose.

Energy Models Are Dangerously Simplistic

Bitcoin maximalist Charles Edwards places Bitcoin’s energy value at $130,000. Great. But what about the real world? Valuing Bitcoin solely on energy expenditure is like valuing a painting based on the cost of the canvas and paint. It would be one thing if it merely went against the artist’s skill level, the market demand, and the cultural significance. You're missing the entire point!

The energy expenditure model assumes we treat Bitcoin like a commodity, a digital form of gold. It's not. It’s a new tech, a social experiment, and a political statement mixed together into one crumbly, explosive concoction. Those factors, the immeasurable ones, are exactly what fuel the price tag.

The Hidden Risks Lurk Beneath

The impact of the halving The recently completed 3rd halving, which cut block rewards to 3.125 BTC, should in theory send the price up. What if it doesn't? What if the increased scarcity is more than canceled out by decreased demand because of… almost anything?

Here's where the unexpected connection comes in: remember the dot-com bubble? Companies were infinitely valued based on “eyalls” and “potential”—not their ability to earn revenue. Our energy expenditure model is the crypto world’s “eyeballs”. That might make it sound awesome, but it absolutely fails to provide any meaningful insight into the actual dangers.

These risks are not included in the energy expenditure model. They're discounted, pun intended. Rather, the perceived “40% discount” is, in fact, an upfront risk premium. The market is pricing this uncertain future in, like it or not.

  • Regulatory Overreach: Governments are circling, eyeing crypto with suspicion. A single well-placed regulation could cripple Bitcoin's price. Think China's ban on crypto mining – a stark reminder of political power.
  • CBDC Threat: Central Bank Digital Currencies (CBDCs) are the elephant in the room. If governments successfully roll out their own digital currencies, what happens to Bitcoin's appeal as a decentralized alternative? This is a direct threat to Bitcoin's core value proposition.
  • Technological Obsolescence: Bitcoin isn't the only cryptocurrency. What if a superior technology emerges, rendering Bitcoin obsolete? Remember MySpace?
  • Network Vulnerabilities: While Bitcoin's blockchain is secure, it's not impervious to attack. A successful hack, even a theoretical one, could send the price plummeting.

Huge outflows of BTC (more than 8,756 BTC, or $830 million, over a few days) came on Coinbase, indicating institutional buying — perhaps even ETF inflows. And Bloomberg ETF analyst Eric Balchunas is calling it a $3 billion inflow “bender.” Does that mean we have nothing to worry about and are assured to reach $100,000? Absolutely not.

Institutions Aren't Always The Smartest

Institutions make mistakes. They follow trends. They get caught up in the hype. Remember when everyone piled into meme stocks? Just because all the so-called smart money is flowing in doesn’t make it smart. In actuality, that doesn’t mean they’ll lose less—it only means they have more money to lose.

Consider the Binance outflows (27,750 BTC). That’s a huge supply shock of Bitcoin walking out the exchange’s backdoor. Some observers may interpret the increased movement of Bitcoin into cold storage as an optimistic indicator. This might just show low confidence in the exchange, or even indicate some fear of enforcement action. Outflows aren't always bullish.

That would make Bitcoin’s past week the best weekly performance so far this year. But its price action does look familiar Q4 2024. But history doesn't always repeat itself. The overhead resistance at $96,100 is no joke — it’s the most obvious Hail Mary hurdle in cryptocurrency today.

Don't Be A Sheep: Do Your Homework

The RSI (Relative Strength Index) could signal as much buying pressure as Q4 2024. Indicators are just that – indicators. They're not crystal balls.

Before you jump on the "40% discount" bandwagon, ask yourself these tough questions:

Yes Bitcoin could go to $100,000, $200,000, heck — it could even go to $1 million. But it could crash and burn. In fact, the “40% discount” is an outright bait-and-switch, as it incentivizes you to overlook the much more likely scenario of the above.

  • Am I truly comfortable with the inherent risks of investing in Bitcoin?
  • Have I considered the potential impact of government regulation and CBDCs?
  • Am I relying too heavily on simplified valuation models?
  • Is my investment decision driven by FOMO (Fear Of Missing Out)?

Don't be a sheep. Do your own research. Understand the risks. And don't let anyone tell you that Bitcoin is a sure thing, or that you're getting a steal of a deal. Because after all, in crypto, nothing is ever a sure thing, except for the fact that you’ll get volatility.

Don't be a sheep. Do your own research. Understand the risks. And don't let anyone tell you that Bitcoin is a sure thing, or that you're getting a steal of a deal. Because in the world of crypto, nothing is certain, and the only thing you're guaranteed is volatility.