Claim : For Bitcoin, because 59% of network activity remains since the peak, the “proxy value” for Bitcoin is 0.59^2 or 0.35 – implying that it’s justifiable for Bitcoin price to be down by 65% ( not 81% as currently down).
Category : Token Economics / Network Valuation
Source : https://medium.com/@cburniske/bitcoin-ethereum-prices-are-down-more-than-the-fundamentals-88fd18a86d14
Evidence/Argument : The following are 2 sub-claims that make up the larger claim around Bitcoin network value relative to network activity.
Sub-claim 1 : Within the article, the starting point of Burniske’s analysis is that Bitcoin is currently processing ~250,000 transactions per day
Status : Supported. Burniske offers an approximate round number that is close enough.
Evidence : https://www.blockchain.com/en/charts
Sub-claim 2 : From its peak (12/17/17) bitcoin price is down 81% (while daily transactions are down only down 41%); implying that the remaining network activity is at 59%
Argument : Burniske suggests the peak in Bitcoin daily transaction was at (12/17/17), but the peak was actually three days earlier (12/14/17). The charts below indicate that on (12/17/17), there were 391,910 transactions, but three days earlier (12/14/17) there was 490,644 transactions; a non-trivial difference of 98,734 in daily transaction, which could influence subsequent calculations and claims.
If we take Bitcoin Daily Transaction on 12/17/17 subtract today’s transactions per day (391,910 vs. 257,623); today’s transactions/per day is 66% of the peak or down 34%, which implies that the remaining network activity is 66%. Re-running Burniske’s analysis, 0.66^2 = 44% (implying it’s justifiable that Bitcoin’s price is down 56%, not 81%)
However, if we take the actual peak in Bitcoin Daily transaction which was on 12/14/17 and subtract today’s transactions per day (490,644 vs. 257,623); today’s transactions/per day is 53% of the peak or down 47%. Implies that remaining network activity is 53%. Re-running Burniske’s analysis, 0.53^2 = 28% (implying it’s justifiable that Bitcoin’s price is down 72%, not 81%)
Evidence : https://www.blockchain.com/charts/n-transactions?timespan=2years
[Suggested Peak Transactions: 391,910]
[Actual Peak Transactions: 490,644]
Status : Confirmed. Prices are down lower than fundamentals.
However, with the adjusted numbers, the divergence between what’s “justifiable” and Bitcoin’s actual downturn is less dramatic (i.e., 9% difference instead of 25% difference).
Addendum: The crux of Burniske’s analysis has an implicit claim that network activity squared (using Metcalfe’s law) is an appropriate measure of fundamental network value. That can be addressed in a separate story. He references this source: https://medium.com/@clearblocks/valuing-bitcoin-and-ethereum-with-metcalfes-law-aaa743f469f6