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It is no secret that 2018 was a difficult year for cryptocurrencies, with Bitcoin losing more than 80% from the highs of 2017 and that most major altcoins have lost 90% or more. Despite the poor performance of the market, a venture capitalist explained why Bitcoin and Ethereum are currently oversold from a fundamental point of view.
The last few weeks have been particularly volatile, with both Bitcoin and Ethereum having set the lows of 2018. Last Friday, Bitcoin fell to $ 3,300 and Ethereum dropped to $ 83, the lowest prices of these cryptocurrencies have seen throughout the 2018. The recent market performance was particularly disappointing for the encrypted investors, as many of them anticipated a winter rally similar to the one that took place at the end of 2017, but instead had new lows and signs of diminishing fundamental strength.
Bitcoin and Ethereum basically surpass
Although recent declines have brought the general market sentiment to the bottom, Chris Burniske, partner of the venture capital firm of New York, place card, offered a more optimistic view of current markets in a recent media post, titled "Bitcoin & Ethereum: prices are falling more than fundamentals".
Initially, Burniske defined his terms and explained to the readers that for him, the fundamentals of cryptocurrencies are defined by the health of their suppliers and demanders.
In his words, the suppliers of consumer goods are "the people who provide the service of the network (currently, the most common form of supplier is a miner)", and the demanders are "those who consume the service".
In addition, Burniske states that the network value – which is obtained by multiplying the price per unit by the number of units in circulation – is the term that will use to show the aggregate value that the market is positioning on a specific crypt-network.
By comparing the network's activity to the price of both Bitcoin and Ethereum, one can find an interesting trend: network values are significantly lower than the daily number of transactions.
"Bitcoin is currently processing ~ 250,000 transactions a day, and Ethereum ~ 500,000 … c & # 39; is a clear divergence, where the value of the network has continued to flow in recent months, but the number of daily transactions is stable until it peaks … From the peak, the network values of Bitcoin and Ethereum are down respectively by 81% and 93%, while the daily number of transactions is only down 41% and 52% respectively, "noted Burniske.
These statistics clearly show that from a fundamental point of view, as defined by Burniske, both Bitcoin and Ethereum are oversold.
Adds to this topic by referring to the "native demand metric" of each network, which is the safe value movement for Bitcoin and the processing of smart contract calculations for Ethereum.
When the decline in the metric of the native value for these two cryptocurrencies breaks down, and comparing it with their price drop, it becomes even clearer that they are fundamentally oversold.
"The two graphs above are my favorites, as they show what I consider the most native of every network query." For Bitcoin, this is a moving value and for Ethereum, it is processing intelligent contract calculations … Since the respective maximum prices, the network values of Bitcoin and Ethereum are down respectively by 81% and 93%, while the demand for the respective native features is down by 74% and 7% respectively ", has explained.
Ruminating on these numbers, it becomes clear that although Bitcoin and Ethereum are both significantly exchanged from their historical highs, their use has not diminished enough to justify such a big fall, which signals that they are fundamentally oversold.
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