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Network value should be a function of network activity
Stock analysts and traders use a variety of indicators, derived from financial statements, earnings reports, and economic analysis, to determine a stocks value. Additionally, they can use a range of technical indicators to show the trend, momentum, volume and volatility of a given stock.
Bitcoin, on the other hand, is not a traditional asset. For example, there is no corporate income statement to help deduce its value. If BTC is trending at $8200, is its price high or low? So, to determine its value, we need to have a point of reference or a relationship.
Travis Kling, chief investment officer of Ikigai Asset Management, and Hans Hauge, a senior quantitative researcher, discussed how Bitcoin network activity helps determine the value of the cryptocurrency on the Oct. 14, 2019 episode of Venture Coinist.
(Travis Kling is the powerful champion of the well-known American hedge fund Point72, and the founder of Point72, Steve Cohen, is known as the King of American Hedge Funds
Kling affirms that there is a relationship between network value and network activity, just as there is a relationship between stock price and stock EPS. Earlier, Kling also said in a separate interview: Network value should be a function of network activity.
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Bitcoin Hash Rate Correlates to BTC Price
Hash rate is a performance indicator for miners. Specifically, it represents the number of SHA-256 algorithms your computer executes per second. A growing hashrate means more miners participating in the network.
For example, according to Hauge, the hash rate gives miners a good sense when the price of bitcoin exceeds the mining capacity of the network.
But here comes the question, does the hash rate cause the BTC price to rise and vice versa?
It can go both ways, Hauge says, like a vicious circle. He sees it as a reflexive system based on human behavior, but it also has a quantitative relationship.
Likewise, technologist Pedro Febrero believes that there is a clear correlation between hash rate and price. But he said, “Usually, hash rate tends to be the leading indicator, except during the 2012-2014 bull run, as prices started to rise before hash rate followed suit.”
The original text comes from bitcoinist, and the English copyright belongs to the original author. Please contact the editor for Chinese reprint.
The original text comes from bitcoinist, and the English copyright belongs to the original author. Please contact the editor for Chinese reprint.
