BITCOIN 2020

This is our complete investment analysis of bitcoin, with two year forecasts on price as well as a synopsis of demographic, regulatory, and economic considerations.

Cryptocurrency myths

most of what you’ve heard about bitcoin is wrong

This paper sets out to correct some of the most pervasive misunderstandings and misrepresentations we have encountered. Topics covered include: store of value, illicit use; anonymity; currency maximization; and price bubbles.

 

HOW TO USE OUR MODELS

ADVANTAGES OF NETWORK VALUE | MODEL SPECIFICATIONS

Cane Island Alternative Advisors, LLC produces single-currency index models of fundamental network value. Metcalfe’s Law explains network value in terms of transaction pairs, and this theory provides an explanation of long-term cryptocurrency price behavior as well as corrections from bubbles. Uses of network value include development of: valuation ratios, target prices, natural growth rates, risk measures, and optimal portfolios of cryptocurrencies.

 

THE NETWORK EFFECT

Why Digital Currency Has Value

Is cryptocurrency real money? The network economy is the emerging economic order within the information society.  The name stems from a key attribute−products and services are created and value is added through social networks operating on large or global scales.  This is in sharp contrast to industrial-era economies, in which ownership of physical or intellectual property stems from its development by a single enterprise.

Metcalfe’s Law is regarded as the first and most reliable explanation of the network effect. To date we have been able to use Metcalfe’s law to explain prices in dozens of cryptocurrencies.  We believe Metcalfe’s Law explains a large number of economic and financial phenomenon.  These include social media applications like Facebook and LinkedIn; payment systems like PayPal and Square; and mobile phone companies like Apple, Samsung, and Google. 

METCALFE’S LAW AS A MODEL FOR BITCOIN’S VALUE

Alternative investment analyst review, Q2 2018, Volume 7, Issue 2

This is the first peer-reviewed and published paper that provides empirical evidence that bitcoin’s medium- to long-term price follows Metcalfe’s law.  Bitcoin is modeled as a token digital currency, a medium of exchange with no intrinsic value that is transacted within a defined electronic network.  Per Metcalfe’s law, the value of a network is a function of the number of pairs transactions possible, and is proportional to n2.  A Gompertz curve is used to model the inflationary effects associated with the creation of new bitcoin.  The result is a parsimonious model of supply (number of bitcoins) and demand (number of bitcoin wallets), with the conclusion bitcoin’s price fits Metcalfe’s law exceptionally well.  Metcalfe’s law is used to investigate Gandal’s et. al. [2018] assertion of price manipulation in the Bitcoin ecosystem during 2013-2014

Available for download at https://caia.org/aiar/3772

WHAT MAKES THE FUTURE OF CRYPTOCURRENCY SO BRIGHT?

Three main factors driving cryptocurrency prices. This is from a presentation at Digital Asset Strategies Summit, Dallas, October 2018.