$138.02 0.44%
ETH · 14w

Chris Burniske calculates that ETH's justified drawdown is only 13% rather than the 93% we've seen

Bitcoin & Ethereum: Prices are Down More than the Fundamentals

To follow is a very rough analysis, zoomed out to give us perspective on Bitcoin’s 10 years of life, and Ethereum’s 3+ years. If you disagree with my approximations, I encourage you to perform your own exploration of fundamentals vs. price and share your findings with the world.

Before going on Bloomberg or CNBC, I always run through the fundamentals of the network(s) I’ll be talking about. When doing this last, I realized that fundamentals of quality cryptonetworks are down less than prices, and significantly so.

For me, fundamentals of a cryptonetwork come down to the health of the supply-siders and demand-siders. Supply-siders are the folks who provision the network’s service (currently, the most common form of supply-sider is a miner), and demand-siders are the ones who consume the service. For this post, I’m going to focus on Bitcoin and Ethereum, comparing prices to fundamentals. You can do the same for other networks, so long as they actually exist (many ICOs still do not have operating networks).

As a more accurate representation of price, I’m going to use network value (“Network Value” = “Price per Unit” x “Units of the Cryptoasset Outstanding”), as this shows the aggregate value the market is placing on a cryptonetwork at present.

In terms of demand-side and supply-side fundamentals, here are the simple ones I’ll showcase:

Bitcoin Demand-Side: Number of Daily Transactions (#), Estimated Daily Transaction Value (USD), Daily Unique Addresses Used (#).

Ethereum Demand-Side: Number of Daily Transactions (#), Total Daily Gas Used (if you don’t know what gas is, read this).

Bitcoin & Ethereum Supply-Side: Hash Rate.

In the graphs that follow, I’m going to contrast how fundamentals and network values have performed since 12/17/17 and 1/13/18, for Bitcoin and Ethereum respectively. These two dates were the peak network values for bot...

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