The value of cryptocurrency

The value of cryptocurrency, according to current pricing models

At the end of 2017, the price of bitcoin rocketed up to nearly $20,000. In June 2018, a single unit of cryptocurrency cost "only" $5,818. Bitcoin’s price has been really shaky. And the recent, mainly negative, buzz has not done much to prevent its fluctuation.

Is the current price of bitcoin justified? This question has been continually asked for a long time. And with a high probability that it will be asked many times again. The problem is that it’s very difficult to set a reference point for bitcoin’s value.

The Size Of The Network Is Key

Let’s review some recent studies and facts about the value of bitcoin. Last year, one of the publications suggested that “Metcalfe’s Law” can be applied to bitcoin. The law originally describes the size of the network as being proportional to the square of the number of connected users of the system (n2).

However, in their paper published in mid-March 2018, researchers from ETH Zurich and the Swiss Finance Institution modified this model (“Generalized Metcalfe’s Law”) and suggested that the exponent, 1.69, should be used instead of the original value of 2. They argue that based on historical data it reflects how BTC’s value has increased compared to the number of users. They concluded that the market capitalization should be somewhere between $22 and $44 billion. Their findings quickly became news all over the globe.