The founding partner at Adamant Capital, Tuur Demeester has recently shared new tools to help investors gauge the value of Bitcoin and other digital assets.
These tools will help investors in estimating market sentiment by careful scrutiny of profit and loss. Moreover, it will also help in making a fine estimate of HODLer buying and selling. Demester also notes that in 2010 when Bitcoin had recently been introduced, users would estimate its value by comparing electricity costs incurred while mining.
Pierre Rochard, the founder of Bitcoin Advisory and also the co-founder of CoinMetrics.io put forth the concept of Bitcoin’s “realized cap”, to determine any crypto asset’s value. Demeester explained that according to the concept, the “realized cap of BTC” is the combined value of all UTXOs ( unspent transaction output) “ priced by the value of asset’s last movement”.
Demeester’s Adamant Capital has created the solution in lines with HODL waves, Realized Cap and MVRV (Market-Value-to-Realized-Value). Further, to accurately gauge the behaviour of HODLers, Adamant Capital uses the total outputs of a block and then combines it with the recorded time of that block.
Demeester further explained that tools recently proposed by Adamant Capital also include “Relative Unrealized P&L” . This tool is a likely indicator of investor sentiment.
Demeester sums it up by saying that by measuring the saving behaviour on the Bitcoin settlement layer, the valuation can be accurately realized. The Relative Unrealized Profit/Loss gives a fair idea of market sentiment, HODLer Net Position Change gives information on whale movements and lastly, Liveliness serves as a tool to compare long-term investors activity. Additionally, it provides a platform for establishing new valuation measures in the crypto space.
In 2011, there was a heated tussle among several research analysts on which would be an apt proposition-buying BTC or mining it.
Also in 2012, Trace Mayer, an early bitcoin adopter, suggested that the “daily moving average” (DMA) of bitcoin’s market cap can serve as a “value indicator”. This is because it eliminates “long-term secular uptrend” from Bitcoin price calculation.
In November 2014, developer Jon Ratcliff in his analysis of blockchain, made a graph which depicted the total number of Bitcoins actively moving at one instant.
Further, In September 2017, Willy Wool, a popular crypto trade analyst and Chris Burniske laid foundations for the widely-used NVT ratio. This ratio compares Bitcoin’s market cap with its on-chain volume.