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.

 

Crypto Investors Report Receiving Tax Refunds From IRS for Being Compliant

Michael LaVere
  • Cryptocurrency investors report receiving full refunds from the IRS after accurately reporting their trades.
  • Crypto Tax Girl warns now is the time to get compliant while the IRS is being friendly.

Cryptocurrency users have reported receiving tax refunds from the United States Internal Revenue Service (IRS) after properly declaring their holdings. 

A new report by Law360 shares the experience of multiple crypto investors who received tax refunds from the IRS after accurately reporting their investments. The reports comes at a time when crypto reporting on taxes are still low, with many members in the community frustrated by the lack of cooperation with the IRS. 

Chandan Lodha, the co-founder of crypto tax firm CoinTracker, said the IRS is using refunds to show crypto investors that they want to encourage users who properly report their trading as opposed to issuing a punishment. One crypto investor was informed that he owed $3,900 in taxes, and was issued a full refund upon paying the amount due. 

According to the report, more than 10,000 individuals received letters from the IRS earlier in the year ordering them to pay taxes owed on cryptoassets and trading. Many of the individuals targeted by the IRS stem from the 2017 Coinbase lawsuit, when the exchange was required to hand over account information on roughly 13,000 customers. 

Laura Walter, a CPA who goes by the popular Twitter handle Crypto Tax Girl, told users this was an indication to get “compliant as quick as you can.”

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