Thoughts on “Bitcoin Fixed Index”

When the price of bitcoin is undervalued relative to the cost of fixing or long-term valuation, it is a good buy.

Thoughts on "Bitcoin Fixed Index"

Recently, some readers mentioned Nine Gods’ Bitcoin Fixing Index and asked if there is a similar index for Ether, so today I will share my thoughts on this.

Nine Gods’ Bitcoin Fixing Index is held by many new and old players as an important reference data for Bitcoin fixing, and I have talked about this index specifically in an earlier article.

Let’s first look at what the Nine Gods’ Bitcoin Fixing Index is. This index is calculated based on the following formula.

Nine Gods Index = (Bitcoin Price / 200 Day Fixing Cost) * (Bitcoin Price / Index Growth Valuation).

The core point of this index is that it compares bitcoin’s coin price to bitcoin’s long-term valuation and investment cost, so that it can determine whether bitcoin’s coin price is higher or lower in the short term relative to its long-term valuation and investment cost. If it is below a certain value, bitcoin is a suitable buy, and if it is above a certain value, bitcoin is not a suitable buy.

Looking further into the formula, this index depends on two key, long-term reference parameters: a long-term coin price fit, and a 200-day coin fixing cost. So this “long term” is very important in the whole formula. But as for how long is “long”, the inventor of the formula chose 200 days, which is about 7 months.

Whether this time is appropriate is a matter of opinion. Different investors can modify this formula according to their own observations and practical experience, such as choosing 100 days, or even 360 days, etc.

Because the selection of the “long term” time is adjustable and empirical, this index is actually a dynamic index, a relative value.

Based on past experience with bulls and bears and feedback from many investors, this formula is very useful for bitcoin investing. But there is one thing about this formula that doesn’t match my investing habits.

For example, in a bull market, we may see a situation where the price of the currency has been hovering at a relatively high level for a while near the middle or late stages of the bull market, and if the price of bitcoin has a medium to small drop in a short period of time, then this indicator will most likely give a buy opinion.

However, I would be conservative about this situation and would not buy. Why? Because I think at this time the bull market bubble has been relatively large, the risk of collapse at any time, it is not worth the risk to buy for this little decline. At this time to buy the future upside will not be too big, while the risk is increasingly higher.

So in general, I will only refer to this index, but generally will not guide their investment behavior according to this index. I use a simpler, more conservative approach to fixing: that is, you can start small fixing when bitcoin drops 60% from its bull market peak, start increasing your fixing after it drops 70%, and stop fixing when bitcoin recovers to 50% to 60% of its peak.

It’s important to note that the bull market peak I’m referring to here is the bull market peak I recognize, not the bull market peak as judged by market sentiment. What does this mean? Using a recent example, Bitcoin recently peaked at over $60,000 and now it’s only $34,000, does that mean that if Bitcoin continues to fall some, I’ll start fixing? At least not at the moment, because I don’t think $60,000 is the peak for bitcoin in this bull market, so I wouldn’t start fixing in this case unless bitcoin continues to fall and gets down to $10,000 before I start fixing again.

This approach has worked for the time being in past bear markets, but whether it still works for the future, that will be a matter of continued observation to see how the market will change.

For the Nine Gods index, I prefer to see it to some extent as an indicator to judge the level of short-term risk, and look at this indicator in combination with other indicators to determine whether the bull market has gone to its peak or is close to it.

We can make a fixed investment index for ethereum by analogy, but this index, I will only use it as an index to judge the market risk, but not as an index to guide my own fixed investment. I will still use the simple and conservative method that I shared earlier.

In fact, no matter what method is used, the most important thing is that investors should understand the essence of a method and choose the right index for themselves by combining their own investment habits and investment style, so that they can refine their own proven investment method.

Since it is a dynamic index, a relative ratio, it means that it must only apply within a certain range, meaning that it is suitable to buy when the price of bitcoin is undervalued for a certain period of time relative to the fixed investment cost or long-term valuation.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/thoughts-on-bitcoin-fixed-index/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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