Value investing - a concept also for crypto currencies?

Admittedly, value investing and investing in crypto currencies seem to be two concepts which do not work well together. After all, aren’t these value investors these guys that buy stocks based on concepts such as low price / book values? Which buy boring stocks with business models they understand for cheap if they are not in favour of investors?

While the above mentioned concepts are indeed characteristic for the behaviour of many value investors, it would be wrong to state that this is what value investing is all about. If you wanted to bring down the true and full concept of value investing to just one sentence, it would probably be this one:

A value investors buys assets at a price which is significantly lower than what the asset is worth. The higher the discount to the true (“intrinsic”) value of the asset, the better and safer for the investor.

This concept assumes that not every asset is priced according to its true intrinsic value at any time, as Mr. Market moves prices massively from time to time, while the intrinsic value is not volatile but changes only slowly over time.
In the crypto currency space this high level of volatility is even more visible than in traditional markets – and we can be sure that the true intrinsic value of crypto currency prices does not fluctuate heavily. Indeed, given that awareness is growing and technical solutions are advancing, one should assume that the intrinsic value of the major crypto currencies should increase over time.

This is why generally the value investing concept would work quite well for investing in crypto currencies as well. However, what we are still missing is a fundamental frame work to properly value the intrinsic value of a crypto currency. I will go further into details in a later post on what I believe should be good metrics to value a crypto currency. But it should not surprise anybody if Steem scores highly on these metrics.

But this is most likely to be discussed much more controversially than valuing companies based on their price to book value....

All the best to you and good luck investing,
rondras

Previous posts:
Why SBD might be worth a punt these days
Why being a psychopath helps to become rich when investing in cryptocurrencies
Why I love steemit - and still think it needs to be changed radically
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