The fair value of Bitcoin is not what traders would expect


AMBCrypto News 06 July, 2021 - 09:01am 21 views

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The bull market, market sentiment, speculations, institutional buying, all these factors have inadvertently defined Bitcoin’s rise over the past few weeks. They form an integral part of the industry that caters to both the demand and supply dynamics. Yet, at its very core, Bitcoin is still an asset considered and imagined from a transactional point of view, and its protocol and fee distribution shape its intrinsic value.

Now, over time intrinsic value has been derived from different avenues but in this article, Bitcoin’s value based on its transactional abilities is analyzed.

The total transactional value facilitated on the Bitcoin blockchain has been drastically down since the last week of May. On 24th May, BTC was valued at ~$34,000 and the blockchain deployed transactions worth over $80 billion. At press time, the value of Bitcoin was still ~$33,000 but the total transaction value was down to $29 billion.

Similarly, the median transaction value has dropped rapidly. From an average value of ~$340 during the end of May to ~$220 at press time.

However, with median transaction value, it is important to factor in the drop of BTC’s value as well, so it is not a like-for-like representation of the actual volume of the transaction value.

The total fees paid to miners have been on a decline since the beginning of April. Lately, Ethereum had dominated the amount of fees paid to their set of miners and many inferred that miners were switching sides for the profitability of mining Ethereum at present.

The 1-week cumulative fee paid to miners has dropped from $94 million during the 4th week of April to a meager $13 million at press time. However, one particular factor that needs to be considered as well is the fee as a percentage of the transaction value.

Finally, when the fair value of Bitcoin is considered based on current network activity against the actual price, the fair value is $17,067 at press time. The last time fair value had dropped to this level was back on December 18th, 2020. Now, there are a couple of things to note before assuming a bearish predominancy. The fair value of Bitcoin has been up against the actual price of Bitcoin on very few occasions in the past year.

On 15th January, 26th-29th February, and between 20th May to 26th May, the fair value was higher.

From a fundamental point of view, if Bitcoin prices only depended on network utilization, this would have been a major red flag. However, as identified in the first paragraph, other factors continue to command a major say in BTC’s price direction. Whatever its fair value might be.

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Biraajmaan covers market trends of major cryptocurrencies. As a graduate in engineering, his interests lie in Blockchain technology. With over a year as a journalist, his articles focus on US and UK markets.

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Disclaimer: AMBCrypto's content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying or selling cryptocurrencies should be considered a high-risk investment and every reader is advised to do their own research before making any decisions.

Read full article at AMBCrypto News

Fear is in The Air: Bitcoin Smiling on the Horizon By DailyCoin 06 July, 2021 - 12:00am

Traditional word-of-mouth tipsters like the media and your taxi driver no longer give you suggestions on buying and trading Bitcoin. Enthusiasm about cryptocurrencies is declining, as Bitcoin fell below the psychological resistance level of $30,000 before bouncing back. Still, volatility is a label of cryptocurrency, which, for investors, is nothing new. The Chinese exodus coupled with environmental concerns brought Bitcoin to a standstill, inciting fear in investors.

The Fear and Greed Index is below 25 despite the bull’s attempt to increase Bitcoin’s worth. Plan B, a crypto analyst, presented a poll result comparing differences in opinion 3 months apart. The new result shows that 41% of people consider Bitcoin will stay below $100K this year, compared to 16% who shared their views in March, when Bitcoin was $55,000.

Jim Cramer, a CNBC analyst, stated he sold “most of his Bitcoin,” even diminishing his crypto holding before the negative developments concluded. Bitcoin cannot perform currency functions, as it’s being pushed as digital gold, yet the possibility of higher financial gains attracts investors.

The Chinese exodus fueled investors’ fears as data from Glassnode shows; miners resort to selling Bitcoin to fund their relocations. Similarly, Glassnode underlines Bitcoin losses sum up to $3.45 billion in a week, prompting investors to cut their positions short, fearing a steeper downtrend. The declining hashrate and restrictions imposed on Chinese miners, forced holders into selling BTC to sustain their business.

Ethereum challenges Bitcoin as a safe haven for investments. The total active addresses of Ethereum surpassed that of Bitcoin for the first time in history. Still, Bitcoin is a lucrative asset as a hedge against inflation. As Jim Cramer argued, the current negative sentiment surrounding Bitcoin will promote more regulatory actions.

However, the SEC commissioner already declared it would draft a regulatory framework for cryptocurrencies. In contrast, regulatory impositions will only benefit the crypto sphere as they can “fulfill their network potential” and increase mass adoption. The popular crypto trader CryptoShark, with over 134k Twitter followers, argued the downside of mass adoption “is getting a whole wave of completely inexperienced crypto traders who bring volatility.”

In the current state, volatility is less of a concern than a lack of traders’ initiative. Bill Noble highlighted volatility is “not going anywhere,” and veteran investors are aware of that. Still, trading volume is far below the regular threshold, indicating a lack of assurance from traders.

There is Sun in Crypto After the Rain

Investment bank Morgan Stanley (NYSE:MS) filed a report with the SEC stating their 28,000 share purchase of Grayscale Bitcoin Trust. However, a report highlights institutions are not yet committed to scooping Bitcoin at a discount. More so, retail investors have sought a locale on Reddit to shun Bitcoin and other cryptocurrencies.

Historically, Bitcoin has experienced downturns and even prolonged bear markets, where market inactivity put crypto expansion to a halt. Institutional adoption is far greater than in the past, and blockchain technology is more reflective of what our society deems necessary. Price slumps are a systematic development in the crypto space.

Among the negative outcomes, Bitcoin and other cryptocurrencies can realize an upside. In a Twitter message, Bitcoin writer Kyle Torpey expressed that “global consensus can be wrong over the short term.” A shakedown similar to what happened in May shakes off weak hands that only seek rewards from speculations. Instead of viewing the current state of Bitcoin as unfavorable, it does cut off the unwanted noise of meme coins and allows developers to increase the overall network performance.

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