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.

 

Ebang Plans Offshore Exchange as NASDAQ Share Prices Falter

Michael LaVere
  • Chinese bitcoin mining rig manufacturer Ebang has announced plans to launch an offshore exchange.
  • The firm's stock has fallen 11% since being listed on NASDAQ last Friday.

Chinese crypto mining company Ebang has announced plans to launch an offshore exchange amidst a drop in share prices. 

Ebang International Holdings, an ASIC mining rig manufacturer, has witnessed a decline in share prices of more than 11 percent since being listed on NASDAQ June 26. The company represented the second mining firm to have a U.S. initial public offering (IPO), with shares falling under the ticker EBON. 

Ebang’s stock launched last Friday with an initial 19.3 million shares offered, leading to the firm raising $101 million. Since opening, share prices briefly rose from $4.85 to around $5, before subsequently falling to $4.29. 

According to a report by Bloomberg on June 29, Ebang intends to launch an offshore cryptocurrency exchange before the end of 2020. The Hangzhou-based manufacturer expects total revenue to grow about 40% following the expansion, with Chief Financial Officer Chen Lei saying revenue could potentially double to $200 million. 

Chen called the stock’s launch a win for Ebang’s brand, despite being listed at a time of escalating tension between US and Chinese trade relations. Chen told Bloomberg the company seeks to draw more customers from overseas markets, including the US, as currently 90 percent of the firm’s sales come from China. 

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