Texas Crypto Fund Unveils Two New Ways to Value Bitcoin
Put those dollar trades away. A Texas-based US crypto fund is offering new scales to value your bitcoin. | Source: Shutterstock
One measures investor sentiment; it’s called Relative Unrealized Profit/Loss Ratio. HODLer Position Change (HPC) is perhaps more interesting. Adamant finds HPC by measuring blockchain “liveliness.”
They explain the concept as such:
“A blockchain where all the coins move within a single block has at that moment a Liveliness of 100%. A blockchain of two years old with no new block rewards, and where exactly one year ago all coins moved within a single block and no transactions moved since, would have a liveliness of 50%. In other words, the measure fluctuates relative to the total lifespan of the blockchain.”
The tool assigns a lower value to cryptocurrencies where there is a high amount of pre-mined coins. Of these types of chains, the paper says:
“Liveliness can be used to weight market cap if comparing cryptocurrencies, as it will be close to zero for currencies that have inflated market cap through pre-mined coins or wash trading of the same few units.”
The actual value of cryptocurrencies is extremely difficult to measure. There are numerous factors to consider. What real value do hodler coins have? And if human error destroyed it? Is it an infinite value, no value at all, or somewhere in between? The blockchain can’t provide such data. Tools like Adamant’s “Position Change” are necessary to help humans fill this gap in knowledge.