Investment company Capital Bitblock has published an alternative model for the valuation of bitcoin. In the report, which examines data for the period from July 2016 to December 2018, «explains the relationship between bitcoin price and its intrinsic value» using proprietary valuation models of the company.
Bitblock Capital claims that in 2017 «the real value of bitcoin was the center of a lively debate on the market» and notes that the behavior of the price of BTC «is similar to the price trend of highly speculative securities,» however, cryptocurrency asset «is similar to gold.»
The document says that currently there are three popular theories evaluation: monetary model, the model of supply and demand, as well as model extraction.
Bitblock argues that there are several problems associated with the exchange model. The report highlights the characteristics of the securities that demonstrate the price behaviour of bitcoin, and concluded that the monetary model «has very limited effect» on the value of BTC.
As noted in the report, «without additional price model» demand and supply «is able to analyze the equilibrium price of bitcoin». In addition, the company found that the model of supply and demand has a number of disadvantages. The report says that «it is difficult to accurately measure the position and elasticity of the demand curve and supply», and that the model «has a very limited practical use», particularly in respect of predictions of the price movement.
The model of evaluating mining Bitblock
Evaluation of model extraction offered Bitblock, described as «model-based noarbitrage pricing or pricing models risk-financial Economics». The company claims that «any risk-free arbitrage opportunity is quickly used by market players with sufficient capital», keeping prices on the level of «no arbitrage».
The study used «model in operating income from the point of view of the miners,» for the valuation of bitcoin. This model is based on the assumption of «market equilibrium in mining industry.» In addition, Bitblock suggests that «the value of bitcoin depends solely on considerations relating to mining power and electricity costs,» and ignores the «irrational volatility and speculation» in the markets.
The report also draws attention to the labor theory of value, describing a key property of bitcoin as a «store of value». According to the equilibrium price generated by a valuation model Bitblock, price and the equilibrium value was balanced in the period from July 2016 until the end of 2017, with prices gradually grew, along with a steadily growing hasraton.
The report asserts that, beginning in November 2017, «bitcoin price deviates significantly from the equilibrium value» and is growing rapidly, despite the steadily increasing hash rate. After a brief correction in November, when the price changed from the equilibrium value in accordance with the model Bitblock, on the last leg of the rally of the bulls in 2017, the value is rejected.
After the price drop beginning in the 2018 model Bitblock, konsolidiruyutsya close to its equilibrium value within several months before to drop sharply, below the value of the equilibrium price. Regarding current market action, the report argues that for the cost of the «irrational» to stay at a level significantly below the equilibrium value for an extended period of time.
Recently an independent Agency Weiss Ratings reported that in 2019, the price of bitcoin will reach a record high, and at the end of last year, the research firm A. T. Kearney said that bitcoin will gradually increase market share of cryptocurrencies and this year the index of dominance BTC will reach 66%.