Novel approaches to valuing Bitcoin

Chris Dannen

By Chris Dannen

In a pseudonymous Medium post, Bitcoin analyst "Plan B" evaluates how to value Bitcoin based on its scarcity, using stock-to-flow ratio, a widely-used metric in precious metals.

Modeling Bitcoin's Value with Scarcity
"'For any consumable commodity [..] doubling of output will dwarf any existing stockpiles, bringing the price crashing down and hurting the holders. For gold, a price spike that causes a doubling of annual production will be insignificant, increasing stockpiles by 3% rather than 1.5%. It is this consistently low rate of supply of gold that is the fundamental reason it has maintained its monetary role throughout human history. The high stock-to-flow ratio of gold makes it the commodity with the lowest price elasticity of supply. The existing stockpiles of Bitcoin in 2017 were around 25 times larger than the new coins produced in 2017. This is still less than half of the ratio for gold, but around the year 2022, Bitcoin's stock-to-flow ratio will overtake that of gold' — Ammous"

Calculating Cryptoasset Market Shares
"Acknowledging the centrality of cryptoasset measurements in a number of regulatory and policy-making areas, and the fact that previous attempts have been incomplete, simplistic, or even plainly wrong, this paper presents the first systematic examination of the economic footprint of cryptoassets and their constituent actors. We aim to achieve a number of objectives: to introduce, identify and organize all relevant and meaningful metrics of cryptoasset market share calculation; to develop associations between metrics, and to explain their meaning, application, and limitations so that it becomes obvious in which context metrics can be useful or not, and what the potential caveats are; and to present rich, curated, and vetted data to illustrate metrics and their use in measuring cryptoasset shares in their respective markets. The result is comprehensive guidance into the size of the crypto-economy."

Hackers Hijacked ASUS Software Updates to Install Backdoors on Thousands of Computers
"The researchers estimate half a million Windows machines received the malicious backdoor through the ASUS update server, although the attackers appear to have been targeting only about 600 of those systems. The malware searched for targeted systems through their unique MAC addresses. Once on a system, if it found one of these targeted addresses, the malware reached out to a command-and-control server the attackers operated, which then installed additional malware on those machines. ... The issue highlights the growing threat from so-called supply-chain attacks, where malicious software or components get installed on systems as they’re manufactured or assembled, or afterward via trusted vendor channels."

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Yellen Says She’s ‘Not a Fan of MMT’ as List of Detractors Grows

  • "Yield-curve inversion happens very easily and doesn’t alone signal a U.S. recession is imminent, though can signal that Fed might at some point need to cut interest rates
  • For quite a long time to come we’ll need to worry that central banks are not going to easily have the tools to adequately respond to financial crisis
  • Populism is source of great uncertainty as workers in Europe and U.S. blame lackluster wage growth and living standards on globalization
  • Also concerned about buildup of corporate debt and leveraged lending; underwriting of some leveraged loans is weak
  • Fed’s process of reducing balance sheet has been running smoothly; Fed will operate with a large balance sheet for a long time to come"

Hedge Fund Launches Hit 18-Year Low
"A drop in investor tolerance for market volatility, as well as a desire for less risky assets, were to blame for the decrease in new fund launches, the report said. Meanwhile, the liquidations held steady because allocators are interested in holding onto the hedge fund assets they already own, the report showed. HFR’s launch and liquidation data includes both hedge funds and funds of funds. "

Bitcoin Bear Market Diaries Volume 11 Tuur Demeester
"Any last words of wisdom? I’ll just repeat my pinned tweet here: 'Bitcoin is digital gold in the eyes of a growing subset of the population. To some extent this group already operates on a Bitcoin Standard: investments are evaluated on their ability to yield a return in Bitcoin.'"

How does crypto OTC actually work?
"Crypto OTC is simply the trading of crypto assets directly between two parties. A trade can be crypto-to-crypto (swapping Bitcoin with Ether for example) or fiat-to-crypto (swapping US dollars for Bitcoin and vice versa). As with all other OTC markets, trade always occurs between a dedicated trading “desk” and another individual or institution, referred to as a counterparty. In 2018, billions of dollars worth of crypto changed hands over the counter."

Bitcoin miner builds electrical transformer in rented space, lawsuit follows
"As noted in multiple exhibits attached to this lawsuit, MMSI alerted Coinmint on more than one occasion that they were in breach of their lease in large part due to construction issues related to all of the electrical changes Coinmint was implementing. Some of the changes were allegedly not approved by MMSI. Another building issue, is that allegedly, snow was coming into Coinmint’s office space. Additionally, Coinmint was allegedly not paying their rent, and not paying the company that did the electrical work for them to support the mining operation. The latter resulted a mechnic’s lien being placed on the altered property. Obviously, these issues, allowing snow to regularly come into your unit, not paying your rent, and getting a lien placed on your rented property, are going to upset your landlord."

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