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Researchers at the ETH in Zurich and the Swiss financial institution suggest that the value of bitcoins can be estimated by considering the size of a network of BTC users. They proposed a model that defined "the general law of Metcalfe". I followed their instructions and roughly calculated the bitcoin value. I got the result of $ 2,855.Pixabay.com
The value of the cryptocurrency, based on the current price models
At the end of 2017, the price of bitcoin rose to almost $ 20,000. In June 2018, a single unit of cryptocurrency cost "only" $ 5,818. The price of Bitcoin was really shaky. And the recent, mostly negative, buzz has not done much to prevent its fluctuation.
Is the current price of bitcoin justified? This question has been continuously requested for a long time. And with a high probability that you will be asked several times. The problem is that it is very difficult to set a reference point for the bitcoin value.
The size of the network is the key
Let's review some recent studies and facts about the value of bitcoins. Last year, one of the publications he suggested that "Metcalfe's law" can be applied to bitcoin. The law originally describes the size of the network proportional to the square the number of connected users of the system (n2).
However, in their paper published in mid-March 2018, researchers from the ETH Zurich and the Swiss Institute of Finance have modified this model ("Generalized Metcalfe Law") and suggested using the exponent, 1.69, instead of the original value of 2. They argue that based on historical data reflects how the value of BTC has increased relative to the number of users. They concluded that the market capitalization should be somewhere between $ 22 and $ 44 billion. Their findings quickly became news around the world.
As it appears today
Inspired by the story of Arthur Laffer and his sketch of a curve in a restaurant, yesterday when you visit a bar and you think about it my last text on Forbes.com on bitcoins, I have roughly followed the calculations of the ETH researchers in Zurich. & Nbsp;
On the day that their article was published (March 15, 2018), the statistics for bitcoins were as follows:
| March 15th | |
| The total number of bitcoins that have already been extracted; in other words, the current supply of bitcoins on the network. * |
16921288 |
| The total USD value of the supply of bitcoins in circulation, as calculated from the daily average of the total market price main exchanges * |
$ 141.430.179.682 |
| The sum of the total number of unique addresses used on the bitcoin blockchain (users) ** |
291435529 |
| Source: * blockchain.com, ** own calculation based on blockchain.com data |
Since then, the market capitalization has decreased, but the number of bitcoins extracted and the unique addresses used are even higher:
| July 22nd | |
| The total number of bitcoins that have already been extracted; in other words, the current supply of bitcoins on the network. * |
17162500 |
| The total USD value of the supply of bitcoins in circulation, as calculated from the daily average of the total market price main exchanges * |
$ 125.840.427.125 |
| The sum of the total number of unique addresses used on the bitcoin blockchain (users) ** |
318676255 |
| Source: * blockchain.com, ** own calculation based on blockchain.com data |
The current value of BTC according to the theory
Without going too far into financial mathematics, if we assume that the market value was about $ 44 billion in mid-March, it should now be about $ 49 billion. If you divide it by the bitcoin number we get the figure of $ 2,855.
Let's see the graph of average price of the USD market among the main bitcoin exchanges to see the difference:
The cash price of bitcoinsAdapted from blockchain.com
As you can see, it is still far above the calculated level.
Of course, it's just a theory and it has its limits (read some of these at the end of the article) and my calculations are far from being precise, but they can show the scale of the phenomena.
Value as a data mining cost
Although it has used some analogues for technical analysis, it is not yet clear that BTC is a currency, a security or a commodity. It has some similarities to each of them but, on the other hand, there are also fundamental differences.
That's why Joost van der Burgt, political advisor at the Dutch National Bank, the central bank of the Netherlands, and adviser to the Federal Reserve Bank of San Francisco in his relationship I tried to examine the value of bitcoin from these perspectives.
He argues that cryptocurrency is not subject to monetary policy or linked to any central government. Nor is there a current bitcoin native economy with native bitcoin prices for goods and services. These determining factors influence the exchange rate of the legal currency.
In some citations, the SEC admitted that cryptocurrencies could be treated as securities under certain circumstances. BTC does not generate interest payments, dividends, profits or capital gains. This is why van der Burgt applied VC (venture capital) methods used to estimate the value of startups. As a result, the bitcoin rating should be around $ 10 trillion by 2030. This equates to 150% of the global gold and US dollar bid offer.
If you treat bitcoin as a commodity, then it has no value. According to the researcher, the cost of creating a single bitcoin is about $ 1,800, calculated from the cost of energy when it is extracted from professional and efficient mining rigs in China. This figure should be increased due to overheads, machine costs and a profit margin of 25% (similar to the margins of the most profitable gold mining companies). As a result, van der Burgt postulates that the value of a single BTC is about $ 2,500.
however, the EliteFixtures report calculates the cost of energy per single BTC on a completely different level. According to this report, the cost of mines in China, where the vast majority of BTC comes from, should be closer to $ 3200.
Ancient philosophers take on Bitcoin
There is also another theory that can be used when thinking about the value of bitcoins. It derives from a maxim attributed to Publilius Syrus: "Everything is worth what your buyer will pay for it". In other words: the value is equal to what someone is willing to pay.
Apparently, it gains more popularity right now.
You can read mine other Forbes posts here.
The disclaimer of the Zurich ETH researchers on the limitation of their methods:
It is difficult to know the true number of active users, in particular because a single user can have multiple addresses that, to an external user, can not be distinguished from the addresses belonging to several users. In addition, the Bitcoin.org Developer's Guide discourages the reuse of keys, advising that each key should be used only for two transactions (to receive, then send) and that all changes must be sent to a new address, generated at the moment of the transaction (belonging to the sender). Depending on how this advice is followed, this measure is therefore an unclear mix between the number of daily users and the number of daily transactions (their activity).
& Nbsp;
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Researchers at the ETH in Zurich and the Swiss financial institution suggest that the value of bitcoins can be estimated by considering the size of a network of BTC users. They proposed a model that defined "the general law of Metcalfe". I followed their instructions and roughly calculated the bitcoin value. I got the result of $ 2,855.Pixabay.com
The value of the cryptocurrency, based on the current price models
At the end of 2017, the price of bitcoin rose to almost $ 20,000. In June 2018, a single cryptocurrency unit cost "only" $ 5.818. The price of Bitcoin was really shaky. And the recent, mostly negative, buzz has not done much to prevent its fluctuation.
Is the current price of bitcoin justified? This question has been continuously requested for a long time. And with a high probability that you will be asked several times. The problem is that it is very difficult to set a reference point for the bitcoin value.
The size of the network is the key
Let's review some recent studies and facts about the value of bitcoins. Last year, one of the publications he suggested that "Metcalfe's law" can be applied to bitcoin. The law originally describes the size of the network proportional to the square the number of connected users of the system (n2).
However, in their paper published in mid-March 2018, researchers from the ETH Zurich and the Swiss Institute of Finance have modified this model ("Generalized Metcalfe Law") and suggested using the exponent, 1.69, instead of the original value of 2. They argue that based on historical data reflects how the value of BTC has increased relative to the number of users. They concluded that the market capitalization should be somewhere between $ 22 and $ 44 billion. Their findings quickly became news around the world.
As it appears today
Inspired by the story of Arthur Laffer and his sketch of a curve in a restaurant, yesterday when you visit a bar and you think about it my last text on Forbes.com on bitcoins, I have roughly followed the calculations of the ETH researchers in Zurich.
On the day that their article was published (March 15, 2018), the statistics for bitcoins were as follows:
| March 15th | |
| The total number of bitcoins that have already been extracted; in other words, the current supply of bitcoins on the network. * |
16921288 |
| The total USD value of the supply of bitcoins in circulation, as calculated from the daily average of the total market price main exchanges * |
$ 141.430.179.682 |
| The sum of the total number of unique addresses used on the bitcoin blockchain (users) ** |
291435529 |
| Source: * blockchain.com, ** own calculation based on blockchain.com data |
Since then, the market capitalization has decreased, but the number of bitcoins extracted and the unique addresses used are even higher:
| July 22nd | |
| The total number of bitcoins that have already been extracted; in other words, the current supply of bitcoins on the network. * |
17162500 |
| The total USD value of the supply of bitcoins in circulation, as calculated from the daily average of the total market price main exchanges * |
$ 125.840.427.125 |
| The sum of the total number of unique addresses used on the bitcoin blockchain (users) ** |
318676255 |
| Source: * blockchain.com, ** own calculation based on blockchain.com data |
The current value of BTC according to the theory
Without going too far into financial mathematics, if we assume that the market value was about $ 44 billion in mid-March, it should now be about $ 49 billion. If you divide it by the bitcoin number we get the figure of $ 2,855.
Let's see the graph of average price of the USD market among the main bitcoin exchanges to see the difference:
The cash price of bitcoinsAdapted from blockchain.com
As you can see, it is still far above the calculated level.
Of course, it's just a theory and it has its limits (read some of these at the end of the article) and my calculations are far from being precise, but they can show the scale of the phenomena.
Value as a data mining cost
Although it has used some analogues for technical analysis, it is not yet clear that BTC is a currency, a security or a commodity. It has some similarities to each of them but, on the other hand, there are also fundamental differences.
That's why Joost van der Burgt, political advisor at the Dutch National Bank, the central bank of the Netherlands, and adviser to the Federal Reserve Bank of San Francisco in his relationship I tried to examine the value of bitcoin from these perspectives.
He argues that cryptocurrency is not subject to monetary policy or linked to any central government. Nor is there a current bitcoin native economy with native bitcoin prices for goods and services. These determining factors influence the exchange rate of the legal currency.
In some citations, the SEC admitted that cryptocurrencies could be treated as securities under certain circumstances. BTC does not generate interest payments, dividends, profits or capital gains. This is why van der Burgt applied VC (venture capital) methods used to estimate the value of startups. As a result, the bitcoin rating should be around $ 10 trillion by 2030. This equates to 150% of the global gold and US dollar bid offer.
If you treat bitcoin as a commodity, then it has no value. According to the researcher, the cost of creating a single bitcoin is about $ 1,800, calculated from the cost of energy when it is extracted from professional and efficient mining rigs in China. This figure should be increased due to overheads, machine costs and a profit margin of 25% (similar to the margins of the most profitable gold mining companies). As a result, van der Burgt postulates that the value of a single BTC is about $ 2,500.
however, the EliteFixtures report calculates the cost of energy per single BTC on a completely different level. According to this report, the cost of mines in China, where the vast majority of BTC comes from, should be closer to $ 3200.
Ancient philosophers take on Bitcoin
There is also another theory that can be used when thinking about the value of bitcoins. It derives from a maxim attributed to Publilius Syrus: "Everything is worth what your buyer will pay for it". In other words: the value is equal to what someone is willing to pay.
Apparently, it gains more popularity right now.
You can read my other posts on Forbes here.
The disclaimer of the Zurich ETH researchers on the limitation of their methods:
It is difficult to know the true number of active users, in particular because a single user can have multiple addresses that, to an external user, can not be distinguished from the addresses belonging to several users. In addition, the Bitcoin.org Developer's Guide discourages the reuse of keys, advising that each key should be used only for two transactions (to receive, then send) and that all changes must be sent to a new address, generated at the moment of the transaction (belonging to the sender). Depending on how this advice is followed, this measure is therefore an unclear mix between the number of daily users and the number of daily transactions (their activity).
