Is Bittensor Still Cheap? 🤔 TAO Crypto Token Analysis

Isn't it fascinating how last week everybody was talking about Bit Tensor? Many crypto influencers were pushing up the token and now everything is over. Nobody's talking about anymore. Attention is declining. The issue is there is correlation between attention and price. When nobody is interested in a token, it tends to go down in price. Is this potentially an opportunity? Let's have a look at the data most people are not considering. Now very long term there is a bit of a tailwind for Bit Tensor and that's the token inflation. Over time there's more and more tokens hitting the market and if the demand long-term doesn't grow as quickly as the supply then the price has to go down. This is the minimum threshold of investor growth that Bit Tensor needs to hit. So supply will grow by a bit over 10% in the next 12 months. The total and maximum supply is 21 million. Currently, we've got 10. 8 million circulating. Now, let's compare Bit Tensor with the rest of the altcoin market. I always like to look at relative valuations. How does an altcoin do relative to everything else? Because there's all of this correlation within crypto. When Bitcoin goes up, when Ethereum goes up, many altcoins go up as well. When the market in general is going down, then many altcoins go down as well. So really what matters for the individual decision for or against an altcoin is its relative performance. Is it doing better or worse compared to the rest of the market. This is Bit Tensor relative to the others market cap. The other's market cap is the market cap of all of the altcoins that are not in the top 10. And Bit Tensor is one of those altcoins. We can see how long-term Bitensor did not outperform. Even with the recent rally, we have seen it underperform the rest of the altcoin market by 16%. Again, I think this is partially due to the tokconomics, but we can also compare Bit Tensor with Bitcoin. And here's something that I say very often on this channel. Most altcoins tend to underperform Bitcoin long-term. There are a few altcoins that have these massive rallies that have to be timed well because again, very often for many altcoin projects, the early investors and the market makers and the team, they get more and more token allocation over time and they tend to sell over time. And that selling pressure very often for most altcoins can't withstand the general market dynamics of Bitcoin. Bitcoin has very healthy tokconomics. Most altcoins do not have that. Now the rally from the bottom to the top is roughly 100% and so the crash from the top to the bottom is 50%. But maybe there's a way to time this in a quantitative way. Maybe it makes sense to buy into Bit Tensor when it's outperforming relative to Bitcoin and to sell Bit Tensor when it underperforms relative to Bitcoin. Here we've got a moving average, but this moving average is just randomly chosen. It's now the 70day simple moving average. Is that really the best? The answer is no. But in this video, we're going to crunch the numbers. We're going to find out what's the best way to time Bit Tensor relative to Bitcoin because again we want to look at relative performance. When we are in a bare market, everything is going down at the same time. But if an asset can at least outperform a Bitcoin over a certain period of time, it might make sense to cycle into that asset. And so here's the back test result. I've run a simulation of buying and selling Bit Tensor relative to Bitcoin. And pretty much every one of those moving averages outperformed just the buying and holding. Right? I back tested all the moving average durations from the two-day up to the 200 day and it all did better than this buying and holding which is this dotted line. Bit tensor underperformed Bitcoin. Right? So the dotted line is below zero and especially between two and 50 days we tend to see most gains. The best simple moving average is the 16day simple moving average. This is now going long and cash. And here are the exact numbers. Buying and holding TOAO over Bitcoin was not great. Timing the market though was great. That more than doubled our capital every single year. The maximum draw down instead of being 83% is only 52%, the maximum draw down duration instead of being more than 2 years is only around 1 year. And so that's then how that looks like on a chart, right? We want to be in bit tensor when we are above the moving average. We want to be in Bitcoin when we are below the moving average. So this is a simple rebalancing strategy. Currently we are above the moving average. And this is then how that looks like over time. So we've got Bit Tensor relative to Bitcoin and the chart at the bottom. We've got our equity chart in blue. We've got Bit Tensor relative to Bitcoin here in gray. And we can see how the line is sideways every now and then. That's when we are quote unquote in cash. So in this particular instance since we are looking at bit tensor relative to bitcoin we are moving back to our benchmark to bitcoin instead of

being exposed to bit tensor. At the bottom we see how the strategy outperforms just buying and holding towo versus bitcoin. So that's how much we do better compared to just having a fixed allocation towards bitcoin and bit tensor without rebalancing. And so we can see quite nicely from this chart that timing the market just on the 16-day moving average works very well for TOAO. The gains are quite consistent. Now this is the back test of being either in Bit Tensor or in Bitcoin. But we can increase the risk and also the return a bit. Instead of just toggling between Bit Tensor and Bitcoin, we could go long one asset and short the other asset at the same time. So in other words, we are betting on rising prices of Bit Tens or when we are above and at the same time on falling prices of Bitcoin and vice versa when we are below the moving average, we bet on falling prices of Bitensor and rising prices of Bitcoin. So we add more price dynamic to the strategy and then instead of getting a bit over 100% annualized, this chart turns into this chart. We get more than 200% APY. But we can also see how this increases our risk quite a bit. There are a few back tests now, a few moving averages where we're doing worse compared to just buying and holding a mix of BTC and TOAO. Again, have a look at the tail end and compare that to a simple portfolio of being either in tow or in BTC. So, it's more risk. There are a few cases where we do worse, but in the case where we do better, we're doing much better. So, instead of getting our 103% APY, we get 220% APY. So this portfolio outperforms by more than 3x every single year. But we do get a higher draw down over time. Right? This time it's 71% and the less risky strategy had a maximum draw down of only 52%. And so that's then the portfolio development for the more risky strategy versus the slightly less risky strategy. The conclusion is the same. We are above the best moving average. We should rather be bullish on Bit Tensor and bearish on Bitcoin in comparison. But I don't really like to still buy Bit Tensor at this price just based on this TA, right? Just based on that we've got a relatively stable support and also a relatively strong resistance. We have bounced off that resistance quite often and we're getting very close to the resistance. And so I think it's best to rather try to find opportunities to bet on falling prices of Tao. Maybe not today, maybe not tomorrow. But the risk of a short of betting on falling price of Tao is relatively easy to manage. We can simply have a stop-loss at around 10%, maybe with some security buffer, 15% above the current price for a potential gain of close to 50%. And so we could enter the short today or we could wait until we really hit the resistance. We could even wait until we fall below the best moving average. That would be the safest of the approaches. But in general, I don't want to bet against the long-term trend. And the long-term trend again is that TOAO tends to struggle versus BTC because of the token inflation. And because of that, I want to rather look for short opportunities and we are getting very close to such an opportunity. Again, the rest moving average is only 16 days. So maybe we just have to wait a week or two until we get very close to that moving average again and then we get a confirmation that it makes sense to bet on falling prices. But that's currently I think the best way to approach the asset that's also supported by the open interest by the way. So how many bets are currently being made on Bit Tensor? There is always some positive correlation between the spot price of an asset and the amount of bets on that asset. When there's a lot of bets on an asset, the price tends to be inflated. When the amount of open interest goes down, the price tends to go down. And because open interest currently tends to be rather at the higher end, it's probably better to look for opportunities to sell or to even bet on falling prices. If you got some value this video, feel free to give it a like. It will help the channel grow. If it's your very first time here, feel free to also subscribe. I publish this regularly. I also share my own trades in the premium membership. There's also the access to the back testing tool that you've seen here in this video. You can back test any asset. You can look at various indicators, not just moving averages. So, feel free to check it out. There's also a oneweek money back guarantee for premium. See you next time on YouTube or see you on premium. Thanks for watching. Ch.