With models ranging from Plan B’s Stock-to-flow (S2F) to Willy Woo’s Network Value to Transactions (NVT), finding the right path to the value of Bitcoin (BTC) has proven difficult. However, according to Nik Bhatia, Bitcoin proponent and author of Layered Money, there is no single path to BTC valuation, just “a variety of solid roots” that we can explore.
In a new essay titled Evaluate Bitcoin and Diagnose Its Unprecedented Volatility Bhatia argues that with all the different models currently used by BTC investors and analysts”extreme volatility” should not be unexpected at all. In fact, Bhatia says, it should be “the basic assumption” for the BTC price, since “no one knows how to value it.”
Bitcoin Price and Volatility:
Further in the essay, Bhatia justified his position that there is no single correct model by pointing out the large differences in price estimates between on-chain analyst Willy Woo’s NVT model and Plan B’s S2F model, which attempts to evaluate BTC using a methodology similar to that commonly used for gold and silver.
The same difference was also highlighted by PlanB itself in a tweet last week:
The popular author commented on the different BTC valuation models, writing:
“An honest study of Bitcoin valuation shows that its growth is based on a variety of solid roots. Some of the roots are easier to evaluate with on-chain and hash rate analysis, while others are harder to quantify, such as the network effects that are taking place right now as Bitcoin fully captures the world’s attention.”
Further, Bhatia went on his big vision for the future of Bitcoin:
“I imagine that government currencies will cease to exist in countries without globalized economies, as people trade online either in BTC- or operate USD-linked stablecoins instead of unstable and non-digital government currencies.”
He added that he believes that a whole generation that has already been born will probably never have a relationship with a traditional bank.
“In these scenarios, Bitcoin will emerge as a world reserve currency and knock on the dollar’s door. How would you appreciate that?”, Bhatia concluded.
And while he remains an optimist about Bitcoin’s long-term prospects, the recent Chinese crypto crackdown continues to keep investors on guard against a possible short-term price reaction.
As recorded by the Whale Alert Twitter account on Sunday, USD 3.1Bn in BTC and USD 2.4Bn in Ethereum (ETH) have already been moved from exchange wallets of Huobi, an exchange with connections to mainland China, and through a greater number of unknown wallet addresses.
And while this is not necessarily bad news, it shows that regulatory action has real implications for what happens in the chain.
Judging by the findings of the on-chain analysis company Santiment, the action could even have a positive impact, as bitcoin and crypto holders are forced to withdraw funds from the exchanges and take personal custody of them instead. According to the company, BTC’s trading balances are now at their lowest level since May 2019, which is “a solid indication” of less selling pressure for Bitcoin.
On the negative side, however, a metric known as the “all Exchanges Whale Ratio” has recently crossed above 0.5, A level One analyst on the on-chain analytics site CryptoQuant said traders should “be careful.”
“We need to make sure the price stays above 40K. Price movements below 40K could be fast and volatile,” the analyst warned of Bitcoin’s near-term price prospects.
At 16:15 UTC, BTC is trading at USD 41,842 and is almost unchanged in one day. The price has risen by almost 4% in a week, reducing its monthly losses to less than 15%.