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- Bitcoin is lying in the undervalued range which is 15-20% lower than the historical average.
- The main reason for the rise and fall of the Bitcoin price is the consensus, that is, whether the number of people using Bitcoin has increased or decreased.
- With the expansion of bitcoin’s market, it has gone from being dominated by the mining sector to being dominated by the financial market.
Chinese Cryptocurrency media, Mars Financial acting editor in chief Meng Xiaoshe had a conversation with DFG Crypto partner Ni Kaiyu.
Ni Kaiyu used to value Bitcoin with the help of three models which he explained, pointing out the basic logic that the global wave of interest rate cuts. He said that according to the current price, it shows that Bitcoin is lying in the undervalued range which is 15-20% lower than the historical average. He also said that he used these three models for the valuation of Bitcoin. These three methods have different weightage that is: 60% is the inflation-adjusted US-Kraft ration NVM and 30% is MVRV, 10% of the weight is the increase in computing power and mining cost.
Bitcoin Price Fluctuations
The main reason for the rise and fall of the Bitcoin price is the consensus, that is, whether the number of people using Bitcoin has increased or decreased. Another reason being shortage effect caused by fast circulation of currency and the relatively slow increase of Bitcoin. The affect on the price is due the inflation expectation not just the inflation rates.
Due to imbalance supply and demand there is a periodical price fluctuation, which is a cycle, which is due to collection of human trading behavior. Having a control over this cycle is the best way of investment.
Bitcoin Popularity Model
The popularity of Bitcoin lies on two possibilities. One is more compliance-centralized exchanges, and the other is a significant increase in performance (segregated witness or Lightning Network). With the expansion of bitcoin’s market, it has gone from being dominated by the mining sector to being dominated by the financial market.
If the total investment in mining is too much, and the currency price falls, there will be mining difficulties that everyone says. This is a normal supply-side process of reducing production capacity. From a long-term perspective, the rise in the price of the currency has brought more computing power to make the Bitcoin network more robust.
Therefore, the disadvantage of Bitcoin network is network overcrowding. The popularity of the Bitcoin family depends on two factors: One is more compliance-centralized exchanges, and the other is a substantial increase in performance (segregated witness or Lightning Network).
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
