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Bitcoin has now retired for a maximum of two weeks and currently trades at just over $ 4000, but Bitblock Capital has released a new report to correlate the price of the cryptocurrency and its intrinsic value, saying that the cryptocurrency is undervalued. A slight twist in history, Bitcoin has not been very impressive in the public in terms of prices from the start of 2018, leaving a whopping 6000% in the last year. The report argues that it is irrational that prices remain significantly below the equilibrium price over a long period of time.
The price of the bitcoin fell to 6000 in August, in what many saw as the low price, but it never went beyond the levels until today. Then November was worse as it went well below $ 4,000. This took place between the high hopes of several product launches that failed to raise prices and tight regulation, although many have seen the price trend last year as a major market correction after the bullish run of 2017. Most investors turned into buy-and-hold hoping for an upward trend towards the end of the year since it was hoped that products such as Bitcoin ETFs awaiting approval by the SEC would raise prices, which it has never been. Prices have worsened further with a massive sell-off due to delays in product launches.
In their analysis, Bitblock compared data from July 2016 to December 2018 to develop the alternative mining valuation model for BTC. The model shows market prices in equilibrium with the "equilibrium price" generated from July 2016 until the end of 2017, with prices of BTC gradually increasing alongside a steadily increasing hash rate. It reveals that the price has disobeyed the "value" trend significantly since November 2017, as prices have skyrocketed despite the steady increase in the hashish rate. According to the model, the price trend deviated briefly during the bull's run at the end of 2017, after a slight correction that saw the realignment of prices with the equilibrium value.
The price then consolidates at values close to the beginning of 2018, but then drops drastically below the equilibrium price value after a few months.
The data mining model is based on the non-arbitrage price or the model for determining the neutral risk price in financial economics. According to the model, prices are maintained at the "arbitrage-free price level" because every risk-free arbitrage opportunity is absorbed by well-capitalized market participants.
The model assigns a value to the cryptocurrency of BTC based on the cost-revenue model from the miners' point of view. It assumes a market balance in the mining sector and that the value of BTC is influenced only by mining power and electricity. In this way, the model assumes that BTC, as a store of value, stores an equivalent value from the "machine work". "So, ignore the irrational volatility and speculation, which greatly influence the price of any cryptocurrency.
A model is not used to evaluate Bitcoin or a cryptocurrency. Bitblock also highlights the problems associated with different evaluation models for Bitcoin, namely the currency model, supply and demand, and the data mining model.
For example, the report states that it is difficult to accurately measure the position and the elasticity of the supply and demand curve and therefore raises the demand and supply model by saying that it has limited practical use when it is about predicting price movements. The currency model also does not have an estimate of prices and has a very limited explanatory power when used in the pricing estimate correctly according to Bitblock due to the security features exhibited by the BTC price action.
The report echoes an opinion of Tom Lee who in December of last year said that Bitcoin was undervalued when it fell to $ 3300. He said that his real value should be four times that price or $ 14800 based on his analysis of user adoption. Not very far from the market trends last year, because, according to reports, it was said that more institutional investors were crammed with cryptocurrency. The price did not respond positively to the trend. Lee, who is the head of research at Fundstrat Global Advisors, put the right value between $ 13,800 and $ 14,800 at that time and said that the cryptographic portfolios should have been about 17 million from 50 million at that time stating that the number of users can not accurately reflect the price. He predicted that the price would come to $ 25,000 by the end of 2018, which never arrived. However, he said that higher prices would be driven by continued consumer adoption and continued adoption of Bitcoin as an asset class in 2019 and beyond.
Lee said the cryptocurrency would be valued at $ 150,000 per bitcoin as a fair value if the bitcoin portfolios approached only 7 percent of Visa 4.5 billion account holders.
Furthermore, Trefis, which is an analytical product driven by MIT engineers and Wall Street analysts, also shows that Bitcoin is probably undervalued as they estimate that the current fair value of Bitcoin should be around $ 4900 as a cryptocurrency key , but the current price is 25 -30% below this fair price estimate. Backtesting the Trefis Estimator estimates the monthly Bitcoin price.
Expects the price until mid-2019 based on the expectations of the author for the number of active Bitcoin Users and daily Transaction Value. So far, the number of active Bitcoin users has gradually increased on average since mid-2018 and is expected to increase sharply beyond June 2019, while the average volume of daily transactions increased slightly from mid-2018 in July, before falling slightly to the end of the year. The volume of daily transactions should gradually increase over half of this year according to the estimator.
According to this estimate curve of Trefis, the price should increase until June 2019 to close to $ 11,000 from $ 7,000 in January 2019. The estimator has traced the historical performance of prices for Bitcoin at an accuracy rate of 94 since it was published February 2018 although the difference between the estimated price and the actual price increased above all for November and December.
It remains to be seen if prices will change when new products like ETF, Bakkt and others will be launched this month.
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