Bitcoin Value Calculator
As the crypto bear market drags into the 4th quarter of 2018, it helps to assess where the fundamental value of bitcoin lies, in order for us not to lose sight of the underlying investment thesis we have subscribed to. A systematic approach is outlined in this article we found: https://seekingalpha.com/article/4209196-bitcoin-value-indicator-october-2018 Here’s a summary, but please read the full article and all its links for maximum benefit.
The 3 metrics of bitcoin’s fundamental value are:
- Number of unique addresses
- Hash rate
- Total transactions
The first is a proxy for the number of users on the network. More users, more wallets, more value according to Metcalfe’s Law.
The second measures the amount of computing power that secures the bitcoin blockchain. In log scale, the hash rate and the market cap of bitcoin are extremely positively correlated.
The third argues that the more transactions there are, the longer and more secure the blockchain, the higher the adoption, and therefore the higher the value.
What does the data say? (If you’re interested in the graphs and regressions, click through to the full article, but the conclusions are listed here) Unique addresses: The low point in unique addresses was in April when BTC was trading slightly under $7,000. Today the number of unique address is higher while the price of BTC is lower. This represents an increase in value. Hash rate: This is undeniably surging, implying miners are still supporting the bitcoin network even as the price has fallen throughout the year. You can get this data on blockchain.com.Total transactions: for the 6th straight month in a row, the number of transactions per month has been increasing. Price is obviously lower today than where it was 6 months ago. Putting it all together, this may signify that the bottom is near, and a value recovery is underway. We will still rely on sound technical analysis to identify long term entries, but for now, the health of the market is slowly improving, even if sentiment hasn’t.
DENNIS HUI – Trade Crypto Live Member