Bitcoin: The Evolving Valuation Saga

Martin Walker
Aug 27, 2023 at 10:09 am

Aswath Damodaran, the distinguished finance professor at New York University's prestigious Stern School of Business, has once again orchestrated a narrative shift around bitcoin, now encapsulating it as "the oft-overlooked currency."

Interestingly, tracing back to the annals of August from the prior year, he had once anointed it as the "shining beacon of millennial gold," weaving a prophecy that its global embracement hinges upon tempering its notorious volatility.

Shifting Stance Once More

Embarking on another intellectual voyage, Professor Damodaran, also bestowed with the moniker "Savant of Valuation," has recently etched his skepticism onto the canvas of bitcoin's prowess and potential. He crafts it as a currency whose utility lies dormant, a "curious collectible" that dances to its own atypical rhythm, defying established collectible norms.

In a cerebral joust against the prevailing notion that bitcoin could wield the mantle of an inflation hedge, he mounts a counterargument, contending that its fate is entwined with the undulating trajectory of equities:

"As the tides of stocks surge, so does it; as those tides recede, it follows suit. A stark departure from the canonical behavior anticipated of collectibles."

Aswath Damodaran, as cited from YouTube.Aswath Damodaran, as cited from YouTube.  

A riveting note to observe is bitcoin's gradual emancipation from the gravitational pull of traditional financial constellations. Recent data, unveils that the digital vanguard's interplay with the S&P 500 Index dwindled to a minuscule 3%, marking a zenith in independence over a two-year span. A stark contrast to the 50% entanglement witnessed at the dawn of 2023, not to mention the 35% entwinement that greeted the summer solstice.

Damodaran's stance on the enigmatic bitcoin has swayed like a pendulum. He unfurled his critique back in the warmth of July 2021, an epoch when bitcoin's valuation experienced a descending cadence after scaling the pinnacle of the $60K summit:

"In the tapestry of my perspectives, a potent currency seamlessly procures your morning brew, underwrites your domicile purchase, and materializes your automobile aspirations. Through this lens, bitcoin's performance wanes, and I dare say, languishes."

The erudite professor from the Indian subcontinent also drew a dichotomy, anointing gold, rather than BTC, as the archetypal bastion of value preservation, citing the former's resilience in times of fiscal turmoil.

Yet, a mere lunar cycle later, he orchestrated a volte-face (during the crypto's bullish streak), characterizing the asset as the preferred lodestar for nascent trailblazers in the investment realm. A torchbearer that dethroned gold and real estate as the quintessential archetypes of value repository:

"If your age bears the weight of 35 years and the fabric of trust has frayed, the luster of gold shan't allure you. That's a relic of ancestral lore. Instead, your compass aligns with bitcoin."

An Additional Instance of a Shift in Perspective

One cannot discount the echo of this intriguing narrative dance in the halls of media luminosity. An exemplar in this regard is the illustrious Jim Cramer, luminary of CNBC's financial spectacle "Mad Money." A protean persona, Cramer's sentiments on cryptocurrencies have weaved a tapestry of transformation, swaying between advocacy, resolute critique, and an eventual rekindling of endorsement over the epochs.

In the annals of 2020, he heralded bitcoin as a "promising recourse" to gold's dominion, even echoing aspirations of his recompense arriving adorned in BTC's digital attire, forsaking the customary fiat garb. However, a tide shift ensued a few lunar phases later, painting the crypto sphere as a stage for "audacious speculators," and his engagement as a dalliance in the realm of chance.

In the most recent chronicle, Cramer has unfurled an explanatory tableau, underlining his lack of animosity towards the industry at large, and instead, casting aspersions upon "DECEPTIVE cryptocurrencies and entities," accused of orchestrating a mirage of financial chicanery.

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