- Charlie Morris is the co-founder of crypto knowledge supplier ByteTree and CIO of its asset administration arm.
- He is a long-term bitcoin bull, however he is skeptical in regards to the present “hype cycle” with bitcoin buying and selling at a 71% premium.
- This is how his truthful worth mannequin works and the way he is positioned for the fourth quarter.
As a veteran fund supervisor with 17 years of expertise working a multi-asset portfolio at funding titan HSBC, Charlie Morris spent loads of time searching for totally different and attention-grabbing asset lessons that might supply non-correlated returns.
Bitcoin was one of many property that caught Morris’s consideration again in 2013.
However, at that time, it wasn’t fairly able to be neatly packaged into an investor’s portfolio, so Morris as an alternative centered his consideration on the info behind the asset class. He co-founded ByteTree.com, an institutional crypto knowledge supplier that gives buyers entry to a terminal with metrics to research the worth motion of bitcoin in addition to conventional commodities, like gold and silver.
Solely final 12 months, did Morris return to the concept of including bitcoin to buyers’ portfolios with the launch of ByteTree’s asset management arm, which presents publicity to 2 totally different crypto funds.
This timing was excellent. Bitcoin (BTC) surged 375% from November 2020 as adoption picked up amongst institutional invecstors, retail merchants and even nations, equivalent to El Salvador, the place it’s authorized tender now.
Simply this week bitcoin reached an all-time excessive of around $66,000 on the again of the launch of the first US bitcoin futures exchange-traded fund, which already has $1 billion assets under management days after launching.
The bitcoin ‘hype cycle’
Whereas the ETF launch has pushed a burst bullish worth motion, Morris isn’t satisfied it should final.
He is notably involved in regards to the ETF sustaining the momentum, primarily based on the efficiency of commodity futures ETFs prior to now.
“Over time, they simply massively underperformed the underlying and you are going to see the identical factor right here,” Morris mentioned. “Now sadly, for bitcoin futures, the extra demand there’s for bitcoin, the more serious the roll yield will get. On the high of hype cycles, you get probably the most underperformance.”
Insider not too long ago spoke to several crypto investors and ETF experts who made similar points. Morris draws comparisons to the USO ETF, which tracks WTI crude oil futures and has underperformed relative to the worth of oil over the long-term.
“Numerous this stuff develop into efficient buying and selling autos the place within the quick time period, you do not care in regards to the slippage, right here and there, for days, weeks, months, they do not actually discover,” Morris mentioned. “But it surely’s whenever you’re there for years, then it actually begins to impinge on efficiency.”
Even earlier than the launch of the futures ETF, Morris was bearish on the sentiment and worth motion surrounding bitcoin. On the Token2049 conference in London, on October 8, he mentioned bitcoin was “overpriced” and worth no more than $28,000 primarily based on ByteTree’s fair value model.
The mannequin calculates truthful worth primarily based on network value to transaction ratio (NVT-BT) and on-chain knowledge to create a good worth valuation. Morris compares NVT-BT to the traditional price-to-sales ratio in fairness evaluation as one of the direct measures in figuring out truthful worth.
Leveraging 12-week transaction knowledge, on October 22, the present truthful worth for bitcoin is round $36,000, that means it is buying and selling at a premium of round 71%, he mentioned.
Presently, round $50 billion is altering arms every week on the blockchain, Morris mentioned.
“We have now acquired a worth the place you’d usually see about $70 or $80 billion price of bitcoin altering arms, and now you have acquired $50 billion,” Morris mentioned. “Since I spoke at that convention, that hole has closed by $10 million, so the chain is selecting up, however that is undoubtedly buying and selling on narrative for the time being.”
Regardless of his skepticism over the quick time period, Morris stays long-term bullish on bitcoin. He believes merely that the market stays forward of occasions proper now.
“We have had bitcoin under truthful worth on 4 events within the final 12 months, however simply on no event since June,” Morris mentioned.
Bitcoin might maintain going up
2021 has develop into the 12 months of the bitcoin narrative, Morris mentioned. Nevertheless, this is not all the way down to bitcoin alone. Morris believes that is pushed by the broader bubble seen throughout a variety of asset lessons.
“Folks simply get carried away about money flows in a zero price world,” Morris mentioned. “You have acquired this massive bubble in just about the whole lot, in bonds and in equities and so forth. Now you have acquired the inflation coming by means of. And so till they put the brakes on, then I feel the bubble is in lots of asset lessons, not simply crypto.”
With bitcoin now breaking out to new report highs, Morris expects this might appeal to some huge cash to the house with the potential to go even larger.
“Each time bitcoin has gotten excited, it tends to be within the fourth quarter for no matter purpose,” Morris mentioned. “2018 was distinctive, however most years, the fourth quarter is fairly sturdy and there is fairly sturdy seasonality round that.”
Morris focuses on the inverse relationship between gold and bitcoin and presents a technique that rebalances between gold. Sometimes gold performs effectively within the first and third quarters of the 12 months. Whereas bitcoin performs effectively within the second and fourth quarter, he mentioned.
Morris’ general fund is totally invested in crypto proper now with an 80% allocation to bitcoin and a 20% allocation to ethereum.
“I am naturally skeptical of hype cycles, I am not having fun with bitcoin in 2021 almost as a lot as I did in 2020,” Morris mentioned. But his long-term thesis retains him invested within the asset class.