A New Way to Value Bitcoin: Tuur Demeester Introduces "New Tools"

Tuur Demeester, the founding partner at Adamant Capital, a bitcoin (BTC)-related investment firm, recently shared “new tools” to help investors more accurately “value” bitcoin and other digital assets.

As explained in a detailed Medium blog post (published on February 20th), the tools assist investors in “approximating sentiment” by analyzing profit and loss and they also help in “estimating HODLer buying and selling.” Before explaining how more advanced tools can be used to determine the fair value of cryptoassets, Demeester noted that in 2010 - when bitcoin had first been introduced - users would try to estimate bitcoin’s value by factoring in the cost of electricity used to mine the cryptocurrency.

In 2011, there were some discussions among research analysts about whether it would be better to acquire BTC by mining it, instead of buying it off an exchange - Demeester revealed.

Trace Mayer, Willy Woo, Chris Burniske Develop Bitcoin Valuation Tools

Trace Mayer, an early bitcoin adopter, suggested in 2012 that the “daily moving average” (DMA) of bitcoin’s market cap be used as a “value indicator” - as it removes the “long-term secular uptrend” from the BTC price calculation. In September 2017, prominent crypto analysts Willy Woo and Chris Burniske developed the widely-used NVT ratio, which compares bitcoin’s market cap with its on-chain volume.

As mentioned in Demeester’s blog, Pierre Rochard, the founder of Bitcoin Advisory, Nic Carter, the co-founder of CoinMetrics.io, and Antoine Le Calvez, a data engineer at CoinMetrics, introduced Bitcoin’s “realized cap” (in October 2018) as a way to determine the cryptoasset’s value. The “realized cap” of BTC is the total value of all the UTXOs (unspent transaction output) “priced by their value when they last moved”, Demeester explained.

Advanced Bitcoin Valuation Tools: Realized Capitalization, Unrealized Profit/Loss

After studying and analyzing how previous bitcoin valuation tools were developed, Demeester’s firm, Adamant Capital, has created a “solution to collect data that places each circulating quantity of Bitcoin in its historical context, in the tradition of previous work such as HODL Waves, Realized Cap, and MVRV (Market-Value-to-Realized-Value).”

In order to “learn more about the behavior of Bitcoin savers”, Adamant Capital uses the “Output Quantities of a block” and combines it with the “Recorded Time of that block” Demeester wrote.

By valuing “every coin at the time it last moved” and aggregating all the transferred value by compiling a list of the transactions, we are able to calculate the “Realized Capitalization.”

"Creating Tools That Measure Changes In Saving Behavior"

“Subtracting the Realized Cap” from the present market capitalization of the crypto market, or the particular cryptocurrency being valued, we arrive at the “Unrealized Profit/Loss (P&L)”, Demeester explained. Other tools recently proposed by Adamant Capital include “Relative Unrealized P&L” - which may be “interpreted as an indicator of investor sentiment”, Demeester argued.

According to Demeester, the conclusion of the firm’s bitcoin valuation research study is as follows:

By creating tools that measure changes in saving behavior on the Bitcoin settlement layer, we believe to have meaningfully contributed to the valuation debate. Relative Unrealized Profit/Loss in Bitcoin tells us about Mr. Market’s emotional state, HODLer Net Position Change gives us information about how Bitcoin whales are moving their pieces on the chessboard, and Liveliness gives us a powerful tool to meaningfully compare long-term investor activity, as well as a platform for building new valuation measures in this space.


Craig Wright Court Ruling Causes Jitters Among Nervy Investors

Neil Dennis

Some Bitcoin investors and enthusiasts are getting uncomfortable over the actions of Craig Wright, the self-proclaimed inventor of the world's largest cryptocurrency, and are beginning to fear another major downturn in the BTC price.

Wright has failed to comply with a US Federal court order instructing him to list his Bitcoin holdings prior to December 31, 2013, and could be held in contempt of court at a hearing which follows on Friday this week.

The Florida District Court order was issued under the ongoing lawsuit filed by Ira Kleiman - representing the estate of his deceased brother David Kleiman, former business partner of Wright - who claims Wright defrauded his brother out of more than a million Bitcoins following his death in 2013.

Investors Getting Nervous

Some investors are getting nervous that Wright may be ordered to repay the Kleiman estate the Bitcoin stockpile, allegedly held in a fund called the "Tulip Trust". If such a stockpile were immediately consolidated into cash it could have a significant impact on the price.

Others fear that Wright - known for his sometimes volatile and capricious behaviour and who claims to be Satoshi Nakamoto, the mysterious inventor of Bitcoin - if piqued by the court's decision on Friday could sell much or some of his own significant holdings.

One Twitter user said:

Another nervously asked a question of BitcoinSV (Satoshi Version) - a hard fork of Bitcoin Cash in November last year promoted by Wright: "Just wondering, what does the BSV community expect to happen to the coin if Craig Wright is indicted?"

According to a court filing on May 8, Wright had named seven trustees of the Tulip Trust, including himself and David Kleiman. The filing also pointed to the existence of a second Tulip Trust. 

While it remains unclear whether both, or either Wright or Kleiman created Bitcoin, the Kleiman estate's lawyer Vel Freedman has said "it is undeniable, however, that Craig and Dave were involved in Bitcoin from its inception and that they both accumulated a vast wealth of Bitcoins from 2009 through 2013".

Freedman took to Twitter last Friday saying that Wright had not complied with the court order to list his Bitcoin holdings as of the end of 2013.

While some investors may have appeared to be showing the nerves, the price of Bitcoin remained just below $11,000 by early afternoon on Monday, up 1.3% on the day. BitcoinSV, however, was down 0.4% at $238.