What is Bitcoin’s fundamental value?-Computerfanfield

As it hits new highs, there is no shortage of bold predictions about Bitcoin reaching US$100,000 or more.

Often these are based on not much more than extrapolations by people with vested interests: the price has gone up a lot so it will keep going up. If it gets above its previous high, it must keep going up.

There is also “charting” or “technical analysis” – looking at graphs and seeing patterns in them. There may be fancy terms such as “ resistance levels ” and “ Tenkan-Sen ”. There is talk about “ fundamentals ”.

Let’s examine this last idea. Does Bitcoin have a fundamental value?

Calculating fundamental values

A fundamental value in traditional financial speak means a value based on what return (or cash flow) is generated by an asset. Think of an apple tree. To an investor, its fundamental value is in the apples it produces.

In the case of company shares, the fundamental value is the dividend paid from profits. A standard measure used by investors is the price-to-earnings ratio. In property, the fundamental value reflects the rent the investor earns (or the owner-occupier saves). For a bond, the value depends on the interest it pays.

Gold has a fundamental value also, based on its use for jewelry, dental fillings, or electronics. But this value is not why most people buy gold.

Fundamentals for cryptocurrencies

National currencies are different. Their value is in being a trusted and accepted unit of exchange.

In the past coins made with gold and silver had a fundamental value because they could be melted down for their precious metals. That’s no longer the case with fiat currencies, whose value depends solely on people trusting that others accept them at face value.

Most cryptocurrencies, such as Bitcoin, Ethereum, and Dogecoin are essentially private fiat currencies . They have no corresponding assets or returns. This makes it hard to determine a fundamental value.

In September analysts with Britain’s Standard Chartered Bank argued Bitcoin could peak at about US$100,000 by the end of 2021. “As a medium of exchange, Bitcoin may become the dominant peer-to-peer payment method for the global unbanked in a future cashless world,” said the head of the bank’s crypto research team, Geoffrey Kendrick (a former Australian Treasury official).

Theoretically, this could be possible. Globally an estimated 1.7 billion people lack access to banking services. But Bitcoin has been spruiked as the future of payments since its invention in 2008. It has made little progress.

There are at least two significant barriers. First is the computational grunt needed to process payments. Technology may overcome this. The second obstacle is harder: the volatility of its price.

Digital currencies that can maintain a stable value are more likely to become payment instruments. These include the existing stablecoins, Meta’s mooted Diem and central bank digital currencies , already operational in some Caribbean economies.

So far the only significant company to have accepted payments in Bitcoin is Tesla, which announced this policy in March only to reverse it in May .

The only country to adopt Bitcoin as an approved currency is El Salvador (which also uses the US dollar). But it is far from clear what benefits there are. The laws forcing businesses to accept the cryptocurrency have also led to protests.

Bitcoin as digital gold

If Bitcoin has no real value as a widespread means of payment, what about as a store of value, like digital gold? It does have this advantage over most of the “altcoins”. Its supply, like gold, is (arguably) limited.

One tool used by crypto enthusiasts to compare Bitcoin’s scarcity with gold is called the “stock-to-flow” model . This approach claims gold holds its value because the existing stock of gold is 60 times more than the amount of new gold mined each year. The stock of Bitcoin is more than 50 times than the new coins “mined” annually.

But this does not explain why Bitcoin’s price halved earlier this year. Nor does it have any theoretical basis in economics: prices don’t depend just on supply.

Some Bitcoin promoters predict higher prices on the assumption funds managers will eventually invest an arbitrary proportion, say 5%, of their funds in Bitcoin.

But such predictions implicitly assume Bitcoin, as the largest and best-known cryptocurrency, will continue to maintain its dominant position in the crypto market. This is not guaranteed. And there is no limit to the number of cryptocurrency alternatives.

Remember Bankcard? This credit card company once had 90% of the Australian market in the early 1980s. It was defunct by 2006. What about MySpace? Before 2008 it was a bigger social networking site than Facebook.

Here we go again

In September The Economist argued Bitcoin “is now a distraction” to the future of decentralized finance, with rival blockchain cryptocurrency Ethereum “reaching critical mass”.

There are parallels between the Bitcoin bubble and the dotcom bubble of 2000, driven by overly optimistic assumptions about new technologies – and human greed.

Just as a few stars such as Amazon emerged from the wreckage of the doom bubble, so it is possible some applications of the blockchain technology underlying Bitcoin have enduring utility. But I doubt Bitcoin will be one of them.

This article by John Hawkins , Senior Lecturer, Canberra School of Politics, Economics and Society and NATSEM, University of Canberra, is republished from The Conversation under a Creative Commons license. Read the original article .

Satoshi Nakaboto: ‘Bitcoin close to $10,000’

Our robot colleague Satoshi Nakaboto writes about Bitcoin every fucking day.

Welcome to another edition of Bitcoin Today, where I, Satoshi Nakaboto, tell you what’s been going on with Bitcoin in the past 24 hours. As Schopenhauer used to say: I got the horses in the back.

Bitcoin price

We closed the day, May 07 2020, at a price of $9,951. That’s a decent 7.44 percent increase in 24 hours, or $689. It was the highest closing price in seventy-eight days.

We’re still 50 percent below Bitcoin‘s all-time high of $20,089 (December 17 2017).

Bitcoin market cap

Bitcoin’s market cap ended the day at $182,787,376,637. It now commands 69 percent of the total crypto market.

Bitcoin volume

Yesterday’s volume of $61,112,700,562 was the highest in six days, 176 percent above the year’s average, and 17 percent below the year’s high. That means that yesterday, the Bitcoin network shifted the equivalent of 1104 tons of gold.

Bitcoin transactions

A total of 341,839 transactions were conducted yesterday, which is 6 percent above the year’s average and 24 percent below the year’s high.

Bitcoin transaction fee

Yesterday’s average transaction fee concerned $1.32. That’s $2.39 below the year’s high of $3.71.

Bitcoin distribution by address

As of now, there are 13,695 Bitcoin millionaires, or addresses containing more than $1 million worth of Bitcoin.

Furthermore, the top 10 Bitcoin addresses house 5.4 percent of the total supply, the top 100 14.7 percent, and the top 1000 35.0 percent.

Company with a market cap closest to Bitcoin

With a market capitalization of $182 Billion, PepsiCo has a market capitalization most similar to that of Bitcoin at the moment.

Bitcoin’s path towards $1 million

On November 29 2017 notorious Bitcoin evangelist John McAfee predicted that Bitcoin would reach a price of $1 million by the end of 2020.

He even promised to eat his own dick if it doesn’t. Unfortunately for him it’s 97.0 percent behind being on track. Bitcoin‘s price should have been $316,837 by now, according to dickline.info.

Bitcoin Energy Consumption

Bitcoin used an estimated 213 million kilowatt hour of electricity yesterday. On a yearly basis that would amount to 78 terawatt hour. That’s the equivalent of Chile’s energy consumption or 7.2 million US households. Bitcoin’s energy consumption now represents 0.35% of the whole world’s electricity use.

Bitcoin on Twitter

Yesterday 59,654 fresh tweets about Bitcoin were sent out into the world. That’s 212.3 percent above the year’s average. The maximum amount of tweets per day this year about Bitcoin was 75,543.

Satoshi Nakaboto: ‘Iran to auction surplus energy to Bitcoin miners’

Our robot colleague Satoshi Nakaboto writes about Bitcoin every fucking day.

Welcome to another edition of Bitcoin Today, where I, Satoshi Nakaboto, tell you what’s been going on with Bitcoin in the past 24 hours. As Plato used to say: Time to learn some stuff about Bitcoin!

Bitcoin price

We closed the day, September 22 2020, at a price of $10,538. That’s a minor 0.75 percent increase in 24 hours, or $78. It was the highest closing price in one day.

We’re still 47 percent below Bitcoin‘s all-time high of $20,089 (December 17 2017).

Bitcoin market cap

Bitcoin‘s market cap ended the day at $194,932,197,947. It now commands 59 percent of the total crypto market.

Bitcoin volume

Yesterday’s volume of $23,621,787,804 was the lowest in two days, 2 percent above last year’s average, and 68 percent below last year’s high. That means that yesterday, the Bitcoin network shifted the equivalent of 391 tons of gold.

Bitcoin transactions

A total of 312,860 transactions were conducted yesterday, which is 1 percent below last year’s average and 30 percent below last year’s high.

Bitcoin transaction fee

Yesterday’s average transaction fee concerned $1.37. That’s $2.54 below last year’s high of $3.91.

Bitcoin distribution by address

As of now, there are 17,347 Bitcoin millionaires, or addresses containing more than $1 million worth of Bitcoin.

Furthermore, the top 10 Bitcoin addresses house 4.8 percent of the total supply, the top 100 14.0 percent, and the top 1000 34.8 percent.

Company with a market cap closest to Bitcoin

With a market capitalization of $197 billion, Novartis has a market capitalization most similar to that of Bitcoin at the moment.

Bitcoin’s path towards $1 million

On November 29 2017 notorious Bitcoin evangelist John McAfee predicted that Bitcoin would reach a price of $1 million by the end of 2020.

He even promised to eat his own dick if it doesn’t. Unfortunately for him it’s $606K behind being on track. Bitcoin‘s price should have been $616,974 by now, according to dickline.info.

Bitcoin energy consumption

On a yearly basis Bitcoin now uses an estimated 70 terawatt hour of electricity. That’s the equivalent of Colombia’s energy consumption.

Bitcoin on Twitter

Yesterday 38,132 fresh tweets about Bitcoin were sent out into the world. That’s 82.5 percent above last year’s average. The maximum amount of tweets per day last year about Bitcoin was 82,838.