How does an investor determine the value of a digital asset when there is often little-to-no intrinsic value that is measurable there yet? Here’s one possible method.
As volatility becomes rampant among digital currencies, a key question becomes: can you predict price behaviour in assets such as Bitcoin and Ethereum, and if so, then how?
Despite the fact that there is no official valuation model for digital assets, that doesn’t mean that there aren’t models we can apply successfully to virtual currency valuation and in turn, to price prediction.
In 2014-2015, I gave a series of presentations across Asia in which I proposed one such model – this was the first, as it turns out, to be applied to Bitcoin and similar assets.
Daniel M. Harrison giving a presentation in Manila in November 2014 where he said that Bitcoin would hit $2400 in 2017.
In those presentations, I showed how via establishing a formula that takes into account the core essential value configuration that is a Blockchain asset class, how Bitcoin – which was then in the $300-range – would rebound up to $2,469.55 at some point during 2017:
Here is the price of Bitcoin on July, 2017:
It goes without saying that sometimes it’s worth doing the math and thinking the concepts through before hitting buy or sell.
The Three Factors of A Meaningful Digital Asset Valuation Model
The reason that the valuation model for Bitcoin that I designed is so precise is chiefly that, rather than just focus on one variable – how much Bitcoin is spent by end-users – it takes into account 3 valuation factors.
The first factor is indeed the value of its consumption and spending power online in the virtual arena; the second is the value of its issuance price (the cost at which Bitcoin is issued relative to other digital currencies, which is essentially a discounted cashflow calculation with a constant synthetic variable thrown in to account for the hard-cap/soft-cap price inflationary dichotomy); the final, and perhaps most important factor of all, is the value of a Bitcoin once it is invested (i.e. what does it return the Bitcoin holder in terms of additional gains ex-proportionate to its own value fluctuation).
Detailed text and formula for computing the value of a Bitcoin source https://www.coinspeaker.com/2017/06/01/value-virtual-asset-bitcoin-will-30000-2020/
and you can view one of them from Spring in 2015 on YouTube
