Categories: BitcoinEthereumNews

Bitcoin and Ethereum Prices are Significantly Below the Fundamentals says VC

Well known Venture Capitalist Chris Burniske posted an article on why Bitcoin and Ethereum prices are well below the fundamentals.

The Cryptocurrency market has taken a hit in 2018 with most of the tokens losing over 90% in value. The dominant Cryptocurrency Bitcoin and the prominent smart contract platform Ethereum are down 83% and 94% from the peak value respectively.

Chris explains the fundamental analysis of both the networks and concludes that the current prices are significantly lower than the fundamental price estimation.

Here are the metrics he considers on both the supply and demand side of the Crypto network.

Bitcoin Demand-Side: Number of Daily Transactions (#), Estimated Daily Transaction Value (USD), Daily Unique Addresses Used (#).

Ethereum Demand-Side: Number of Daily Transactions (#), Total Daily Gas Used

Bitcoin & Ethereum Supply-Side: Hash Rate.

Number of Daily Transactions (Demand-Side)

Chris refers to the Metcalfe’s law which measures the value of the network by the square of the network activity. By this metric Bitcoin and Ethereum still, on an average have 250,000 and 500,000 thousand transactions every day which is only down  41% and 52%, respectively from the peak value.

According to this metric, a 65% drawdown in Bitcoin and 77% drawdown in Ethereum network value is justified.

Native Functionality (Demand-Side)

In this next metric, Chris considers the network functionality which is value moved across the network in the case of Bitcoin and processing of smart contracts in the case of Ethereum.

Excluding the exchange volumes, Bitcoin easily moves over a Billion Dollar worth of value every day. Smart contract computations in Ethereum have also been on the rise since the peak.

According to this metric, 26% of the network activity remains since the peak, which means a 93% drawdown in network value is justified. In the case of Ethereum 93% of the network activity remains since the peak, which means a 7% drawdown in network value is justified. Ether is massively undervalued according to this metric.

Hash Rates (Supply-Side)

Even though Bitcoin hashrate decreased by over 10% recently, it is still higher than the current price value.

In the case of Ethreuem, developer activity is a core component of the supply side which is also outperforming the market according to Placeholder’s internal analysis.

Chris concludes by saying:

Placing these points in the context of the idea that theory follows price, price follows theory,” it’s clear to me that Mr. (Crypto) Market has only a vague idea of what he’s doing right now.

Blockmanity’s Take

The Crypto markets more often than not act in an irrational manner and do not follow the fundamentals, there are quick bull runs and extended bear markets. There are no market standards and established ways to assess the fundamental value of Bitcoin or other Cryptocurrencies.

The current bear market may extend for a longer period than expected by fundamental analysis and the next bull market could be faster than the fundamentals indicate.

Also Read:

Image Source: Unsplash


Discuss this news on our Telegram Community. Subscribe to us on Google news and do follow us on Twitter @Blockmanity

Did you like the news you just read? Please leave a feedback to help us serve you better

Disclaimer: Blockmanity is a news portal and does not provide any financial advice. Blockmanity's role is to inform the cryptocurrency and blockchain community about what's going on in this space. Please do your own due diligence before making any investment. Blockmanity won't be responsible for any loss of funds.

Shrikar Parashar

Shrikar is a Blockchain evangelist. He is a die-hard fan of security tokens. He follows the market closely but does not trade. He believes in Hodling.

Share
Published by
Shrikar Parashar

Recent Posts

Bullish Signals for Sui Blockchain: Top SUI meme projects of 2024

Macro guru and Real Vision CEO Raoul Pal shone the spotlight on a rising layer-1…

1 month ago

AI Companions: A New Era of Digital Relationships and Virtual Experiences

As the technology landscape transforms at lightning speed, AI Companions has positioned itself as a…

2 months ago

zkCross Network: Simplifying DeFi Complexity and Achieving Fundraising Success

Did you know that 85% of DeFi value is concentrated in six blockchains?  DeFi is…

2 months ago

Don’t Miss Out: Get $CLP Tokens in the Exclusive RWA IDO Now!

CLAPART - a groundbreaking RWA platform has launched its much-anticipated $CLP token IDO on Gempad…

2 months ago

Step into the Future of Web3 at Blockchain Futuristic Conference 2024, August 13-14

Join us at BFC 2024 to explore the future of Web3. Use a special discount…

3 months ago

WebX Asia 2024: Web3 Innovation Ignites in Tokyo

Catch all the updates with Altcoin Observer, official media partner of WebX Asia 2024. Gear…

3 months ago