1: The great value investor Warren Buffet may not think highly of crypto yet many of his core investing principals apply to the asset today. My recent investor memo titled “Value Investing in a Crypto Recession” explains why. Let’s break down the take aways in this thread:
2: The price of Bitcoin was in a bubble at the end of 2017 following a year that saw 1900%+ returns. Only a year later, the market sits at the opposite extreme as demonstrated by the selloff at the end of 2018 that saw prices plunge by more than 80% from previous highs.
3: Investor psychology and risk appetite has shifted drastically over the past few years. Market euphoria and excessive risk taking have been replaced by extreme pessimism, risk aversion and lack of interest in the asset class, while fundamentals have improved.
4: Its been said that history doesn't repeat itself, but it often rhymes. Seasoned investors know that the crypto markets are no exception. Like all markets, crypto markets move in alternating boom and bust cycles precisely like the ones we've witnessed over the past two years. 
5: Beyond price, we leverage the P/SoV ratio to help us understand relative fundamental valuation levels and the current stage of the market cycle overall. An explanation of the model we developed can be read via the following link: medium.com/@aenigmacapita…
6: Functioning much like a traditional Price to Book (“P/B”), the P/SoV ratio (“Crypto P/B”) views a cryptocurrency as expensive when the ratio is high and visa versa. The Bitcoin P/SoV ratio is back to pre-bubble multiples, sitting near previous 2013-14 mid-cycle trough levels.
7: Beyond Bitcoin, the P/SoV ratio has also been a strong valuation indicator for all of the leading “Alt Coins” during crypto market cycles. To illustrate, historical prices and P/SoV ratios are shown below for: LTC, ETH, DASH, and XMR.
8: Macro crypto market cycle valuations tend to trend together. Cycles have historically come in two medium-term waves that form one longer-term macro market cycle phase. We view the 2017 price move as the first wave in the third longer term market cycle trend.
9: Prices, returns, and P/SoV ratios of leading cryptocurrencies during historic market cycle phases are shown in the table below. Viewed through this lends, quality crypto assets look attractive for long-term, contrarian, value investors.
10: The full Investor memo can be read via the following link: aenigma.capital/wp-content/upl…
