Analyst says 94% of bitcoin's price movement over the past four years can be explained by one equation
FundStrat cofounder Tom Lee says, “if you build a very simple model valuing bitcoin as the square function number of users times the average transaction value. 94% of the bitcoin moves over the past four years is explained by that equation.”
This model is based on Metcalfe’s law, which says the value of a network is proportional to the square of the number of users on the network.
Based on this model, bitcoin has been trading at a level above the price projected by the model. FundStrat remains positive on bitcoin long-term but sees risk of a short-term correction growing.
For example, consider the fax machine — which is utterly useless if you are the only one who has one. The value increases exponentially as other people get fax machines. This is also true for social networks. Facebook is valuable because so many of your “friends” are on it. It’d be a boring place to surf alone. Or as Lee puts it, “if you double the number of users, you’re more than doubling the utility value.”
https://www.businessinsider.com/bitcoin-price-movement-explained-by-one-equation-fundstrat-tom-lee-metcalf-law-network-effect-2017-10#D3fpeBsgqamP2Bec.99
Tom Lee is bullish on bitcoin and for good reason. The network is expanding at an accelerating rate. This is crucial. At present, there is more development on the bitcoin platform than any other blockchain. This probably will continue for a while.
Hopefully we see the development of a host of apps emerge on the steem blockchain also. We have some neat stuff being developed and coming online. It stands to reason that we will see more.
True bud i agree as soon as i found out about a place to build apps on steem i was blown away.