I’ve spent the last couple of hours trying to determine if Bitcoin is undervalued enough to justify buying it. I first approached this question by comparing its price and daily transaction count to what they were historically (see pic related). This type of analysis showed that BTC is still overvalued relative to where it was at the bottom of the 2014-2015 bear market and the bottom of the 2011 bear market. Additionally, I observed that the number of daily BTC transactions has been relatively flat for the last year or two, which is a sign that it is no longer on track to achieve true mass adoption.
However, while thinking about these results, it occurred to me that it may not be appropriate to simply look at the daily transaction count. Bitcoin transactions are frequently executed in batches. As a result, I believe that the USD value of the transactions is likely a better indication of the amount of value that is being transferred than the transaction count itself.
I then attempted to check if the total USD value of all BTC transactions is high enough to justify its current price (see pic in next post). Surprisingly, this type of analysis showed that BTC is just as overvalued as it was in late 2017. During the 2014 bear market, the total transaction value fell at roughly the same rate as the price but leveled off before the price bottomed out. During this bear market, the total daily transaction value fell far more quickly than the price.
Right now I’m thinking that I won’t buy BTC unless the price starts to level off below $2k. The one flaw I see in this type of analysis is that it doesn't account for off-chain transactions. However, I don't think the lightning network has been adopted widely enough to significantly impact my overall conclusion.
Here is a chart showing how the price has historically correlated with the total USD value of the daily transactions. All of my data was taken from blockchain.com/explorer. They don’t let you export the total USD value of the transactions, so my chart is showing (daily transaction count)*(daily average BTC transaction value)*(BTC price).
its an unscaleable piece of shit with negative merchant adoption that has been coopted by (((blockstream))) and tamed by the futures market. it was a nice experiment but btc is over, I would salvage as much as you can and keep a small portion in for suicide insurance.
Austin Torres
high tx volume is caused by people cashing out
Carter Sullivan
During the 2011 crash, the tx volume fell even as the price was plummeting. Also, the daily transaction volume is currently lower than it was at the peak of the 2017 bubble. The tx volume isn't always correlated with the short-term price movements.
>salvage as much as you can and keep a small portion in for suicide insurance I'm a contrarian nocoiner. I don't have a crypto portfolio to salvage.
Cooper Sullivan
still extremely overvalued desu
Julian Rodriguez
you can't expect this relationship to hold when there is a cap on transactions 5-7tps because of the 1mb block
Jayden Peterson
more like undervalued by at least 1k
Jack Long
>no use case >"store of value" that loses 50% value in a day >negative merchant adoption >unscaleable >L2 solutions have been promised for years and are still vaporware uh yeah totally undervalued user. BUY BUY BUY
Chase Walker
>>L2 solutions have been promised for years and are still vaporware The lightning network is not vaporware. Unfortunately, I couldn't find any statistics showing how many transactions are actually taking place on it, so I couldn't factor it into the analysis in the original post.
Jaxson Ross
Nigga, I ain't buying at 3k because I am hoping to "sell" it to someone else for more. I am hoping that enough of us buy and hold these bags the community grows and the tax evasion and money laundering I can do makes me a mad profit.
Jaxon Bailey
ln is collapsing. bitcoinvisuals.com/ln-channels-per-node 14 channels per node. LN was supposed to work with 1-2 channels per node. Why would you open a new channel? If your payment doesn't work over existing.
There are 1929 nodes in total, ie. that many people/companies can actually send anything between each other.
Remember in 1995 thinking I would be able to stream porn while downloading movies, and jerking it to a camgirl all at the same time would one day be possible.
Thomas Scott
BTC is overvalued above $0.
Elijah Young
>14 channels per node. LN was supposed to work with 1-2 channels per node. Do you have a source on this? I was under the impression that it was supposed to be a mesh with many channels per node.
>Why would you open a new channel? If your payment doesn't work over existing. According to bitcoinvisuals.com/ln-channels, only 683 of the 13509 channels are duplicate. 95% of them are unique.
>There are 1929 nodes in total, ie. that many people/companies can actually send anything between each other. Yeah, the node count isn't growing very quickly either.
Owen Davis
>If all transactions using Bitcoin were conducted inside a network of micropayment channels, to enable 7 billion people to make two channels per year with unlimited transactions inside the channel, it would require 133 MB blocks (presuming 500 bytes per transaction and 52560 blocks per year). lightning.network/lightning-network-paper.pdf >According to bitcoinvisuals.com/ln-channels, only 683 of the 13509 channels are duplicate. I didn't claim they were a duplicate, only that the process is as follows: - try to send some amount to somebody - routing failure - oh well, lets open a channel directly to the target, that should work repeat 14 times on average
Ayden Phillips
>repeat 14 times on average 13 times*
Lucas Garcia
LN is total trash. Routing is still unsolved. Which means it's a centralized value-less network hastily pasted over bitcoin so Blockstream can keep pushing back scaling for years
Bitcoin is dead. Just drop it already.
Thomas Hernandez
Look at this guy. He's been thinking about it and chasing up numbers. He's an intelligent investor. Unfortunately, he has failed to realise that he's chosen to make his bed with people like this Get on the lightning express, or get left with Sanjev's vision.
Robert Moore
>lightning express
Even the developers of the lightning network said it's a lost cause
There's no way this shit is going to work when it's made by an inexperienced team (look at their bio's that's stuffed with buzzwords). The CTO's only industry experience was being a Google intern.
Camden Garcia
association fallacy and he's right routing is unsolved, right now it's literally bruteforce. A node tries all possible paths until it gives up after some predetermined try constant. LN only works for micropayments (relative to channel balances).
Ian Parker
The number of active addresses has been growing linearly while the price has been growing exponentially. Any analysis involving the number of active addresses is going to show that BTC is overvalued relative to where it was historically. See bitinfocharts.com/comparison/bitcoin-activeaddresses.html#log
Aiden Price
Listen, you seem like you have at least room temp IQ, which makes you officially biz's smartest cashie.
What makes you think that routing has to be "solved"? Do you realise how high the bar is to "solve" mathematical problems? Do you realise that calculating the motion of three objects in orbit around each other has still not been "solved"?
Show me the research which delineates an exact line between a heuristic for the Cashie's Routing Problem which is good enough for practical real world use, and one which is not.
Ethan Reyes
>BTC is being used by a few million people. That's about the maximum number it *can* be used by, due to the intentional scaling limits put in place.
Ian King
do they just pay you money or are you comped?
Kevin Evans
Shut up retard
Hunter Hernandez
>The one flaw I see in this type of analysis
>I’ve spent the last couple of hours
>The one flaw
BTC is going down, but your analysis is indian CSW tier.
Carson Nguyen
>which makes you officially biz's smartest cashie. what? no I don't own bch >What makes you think that routing has to be "solved"? LN claims to be a scaling solution, which means equivalent transactions, were they to be executed on-chain, should take less block space than everything needed to set up all needed LN channels. One channel open is equivalent to about 3 normal 1->2 or 2->1 transactions, so even without counting channel closes, each channel open must replace >3 normal on-chain transactions to be a scaling solution. With 14 nodes per node, that's >42 transactions per user
LN works great for limited use cases like exchange to exchange transfers, because transfers constantly go in both direction over the same channel.
>your analysis is indian CSW tier. That is the entire reason I created this thread. I don't claim to be an expert. If you have *specific* criticisms then I'm interested in hearing them.
Xavier Clark
wake fucking up
It has 0 utility. ZERO. Holding BTC offers the holder NO BENEFITS. Utility tokens with solid use-case is the only way ahead.
Brody Green
Nothing in that comment addresses routing.
Aaron Rivera
>number of active addresses has been growing linearly while the price has been growing exponentially So you're saying that value is increasing exactly how Metcalfe's Law says it should be increasing? Which is the law that most bitcoin fundamental analysts use to predict bitcoin value and has correctly predicted price in the past?
you asked why routing has to be 'solved', it has to be much better to actually make ln a scalability solution
Isaac Clark
bitcoin is peer to peer cash. peer to peer routing in lightning network is not possible because it is NP hard. travelling salesman problem if you don't want peer to peer cash just use the existing banking system.
Gavin Carter
Yes, better. Not perfect.
Zachary Powell
It's not a travelling salesman problem.
Leo Miller
even if that correlation made any sense, it would imply a return to normal after a ~1year period of being overvalued, as the distance between the lines is now the same as it was all the years before
Aiden Rivera
First of all, Total network value = nodes^2 is a second order polynomial, not an exponential function. Exponential functions have the form f(x) = ab^x. See en.wikipedia.org/wiki/Exponential_function if you don't believe me.
I just did a polynomial regression on the price of BTC over the last 8 years. The resulting function had an r^2 correlation coefficient of 0.64. I then did an exponential regression and got an r^2 correlation coefficient of 0.87. This means that the exponential function fit bitcoin's price history better than the polynomial function. In other words, the price of bitcoin has been growing more quickly than Metcalfe's law would predict.
both power and exponential models have very high r2 when you look at the full data set you can't choose a power model over an exponential by comparing r2. the reason the price is exponential is because supply is limited and adoption (demand) is exponential as described by the diffusion of innovation s curve pic related. Bitcoin is money not a telecommunication network btc cannot hold the exponential trend as its adoption has been limited to 1mb per 10min. creating off chain demand with lbtc and lightning reduces security by increasing demand without respective on chain security incentive, increasing the incentive to treat btc as a ponzi additionally value is defined by gold not usd, we have not really had inflation since 2009 so the growth will go super exponential if we see the inflation we saw in the 30s, 70s and 00s. Not to mention the extra demand non inflationary currency will experience in inflationary times.
