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Valuation of Crypto Currency

Feb 17, 2018 Posted /  4290 Views

Valuation of Crypto Currency

Recently, Bitcoins have just finished another cycle of yo-yoing. The value of Bitcoins started rising from mid of December and touched the peak point of $20,000. Gradually the value started diminishing and in two months span, it reached $6,000. All the investors and speculators were waiting for its pick-up which was recorded a week ago. The current value of Bitcoin is $9,693 USD with accumulated market capital worth $163,496,198,962 USD. Based on Forbes interactive Bitcoin price estimator the warranted price is around $10,000 USD which is 15% more than the current value. The Forbes interactive Bitcoin price estimator is calculated on the basis of average activity level. 

How does the value of a digital coin ascertain?

The value of a cryptocurrency or a digital token depends on three factors as follows:

Utility, Underlying Technology, and visibility.

Firstly talking about utility, all digital coins have nearly same usefulness and thus they would have been valued same. Because of this reason this factor is not taken into consideration while calculating the value of a crypto.

Considering Bitcoins,  its value is more than other virtual tokens because investors perceive its value higher. Here comes the ‘Visibility’ factor. There are several elements that affects the visibility of a coin, covered under PR & Marketing department. Generally, the popularity of a coin is measured on the terms such as the number of exchange platforms where the cryptocurrency have been enlisted and the positive traits about which media people discuss.

But at the end of the day, as per Metcalfe’s Law,  the value of a cryptocurrency is determined by the number of users. In case two coins have the almost same number of users then the value will be calculated on the basis of the volume of transactions taking place. For eg., There are two coins named Coin A and Coin B. Both coins have 100 users but average number of transactions conducted by users of Coin A is more than that of average number of transaction conducted by users of Coin B., In that case, coin A will be valued more as actual value i.e Product number of users and number of transactions will be more in case of Coin A.

Bitcoin Price Estimating Model:

As we understood with above example that while estimating the value of a Virtual token one should consider its number of users and volume of transactions conducted on a Bitcoin Network. Based on this principle a Bitcoin price predictor has been generated named ‘Trefis Bitcoin Price Estimator’  .

Number of Active Bitcoin users

The number of active Bitcoin user is gathered from unique Bitcoin addresses as compiled by From this point, one can get the number of active consumers at the global level.

Daily Transaction Volume

From the daily transaction value we mean the number of times a single coin has been used for a transaction purpose. This helps in calculating the utilization of a coin. For this, the corresponding figure to is used.

The model came up with various experiments conducted using previous data to check the accuracy. The experiments were executed on the data from 2011 to 2017 and 96% of results were found accurate.  For futuristic results averages of monthly data and daily data are calculated separately.

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Tags: blockchain bitcoins price Bitcoin addresses Transaction

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