Bitcoin’s blockchain is a decentralized ledger whose security depends on miners upholding the network with their systems. Miners are rewarded for their work with Bitcoins, keeping these group of miners motivated and by extension, keeping the network secured.
However, the block subsidy given out to miners has an expiry date, and there were fears developing that Bitcoin’s security may be under threat after the subsidy runs out.
Tamas Blummer, Bitcoin Developer, commented on the situation and suggested that the direct use of the Bitcoin blockchain would be “ridiculously expensive” in the future.
Now, Tuur Demeester, Founder of Adamant Capital, has put forward a relevant comparison as to where Bitcoin could be headed in the future.
Demeester stated that Bitcoin’s present situation resembled crude oil, as the natural resource is scarce in nature. He said that in the 1860s, advantages of petroleum had to be explained to skeptical buyers as users were very wary of its use, just like Bitcoin.
The popularity of petroleum exploded as exports rose from 40 barrels to 25 million barrels over two years. The price of petroleum, like Bitcoin, was also extremely volatile in its early adoption days when the market was first being established. Prices in London for instance, fluctuated between the value of 5 and 30 pence a gallon.
Demeester outlined the entire scenario by stating that there were a lot of “possible parallels” between Petroleum and Bitcoin. Both entities took years to be identified as potentially major economical factors. Both of them faced early infrastructure issues and outright growth was evidently slow.
However, both exhibited the same characteristics of rapid adoption, after implementation and popularity reached its tipping point.
Demeester cited this example to suggest that Bitcoin would not lose its significance when block subsidy dies down as with time, Bitcoin would be more understood and refined as an virtual asset and solidify its stature as a valuable asset.
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Bitcoin’s on-chain/off-chain valuation indicators the key point of focus as coin heads to $13,000
With the rise in Bitcoin’s price, the rest of the cryptocurrency market has followed suit by displaying a green trend across the board. In a recent series of tweets by popular cryptocurrency analyst Adam Tache, users were informed about the top Bitcoin on-chain and off-chain valuation indicators, derived from on-chain valuation models.
The analysis touched on the Mayer Multiple created by dividing the price by the all-important – 200 day moving average. The current average Mayer Multiple stands at a figure of 1.39, which may climb higher. Looking at previous figures, the normal Mayer Multiple figures stated that if the value shoots up to 2.4, then Bitcoin eventually retraces back to a comfortable 1.5. The Mayer Multiple is usually considered as the original indicator used to clock the valuation of Bitcoin.
Another major indicator discussed in the thread was the NVT Ratio invented by Willy Woo, Partner at Adaptive Fund. The indicator is used to calculate Bitcoin’s prominence or value in the cryptocurrency space by evaluating the amount transacted on the blockchain as a “proxy for investment flow and bear and bull market cycles.”
At the moment, the NVT ratio for Bitcoin is in an abnormal region compared to the start of previous bullish patterns. The NVT ratio was above the “bear market” separator, which meant that the cryptocurrency was overbought. When Bitcoin is overbought, it usually means that the buying pressure is much higher than the selling pressure. Adam Tache opined,
“NVT signaling overbought is likely due to a number of factors — namely the proliferation of exchange-based, purely off-chain txs driving short-term price action.”
The analysis also pointed out the liveliness of the Bitcoin indicator created by Tamas Blummer. The indicator showed the inverse count of lost or ‘HODLed’ Bitcoin, while stating that when the ratio increases, long-terms holders of the cryptocurrency decrease their positions. The indicator conveyed accumulation of Bitcoin when the ratio decreased.
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