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RE: This Single Metric Seems to Correlate More with CryptoAsset Values The Past Two Weeks Than Most Predictive Methods
Isn't this like saying the market cap is driven by the amount of money invested? The point of curency is communal trust in traded tokens. So its pretty obvious the more users the more trust and value. How much lead time does knowing the active users give you? The bounce seems so tight.Is it predictive, or just corolative?
Those are great questions and are appreciated. We believe this is a bit more than stating that the market cap is driven by the amount invested. Price x Circulating amount = Market cap. That correlation is direct. It doesn't even require a coefficient that needs to be fitted. There is no such guarantee or relationship with number of new unique users which is what the model derives, as well as coefficients related to it. If the relationship were the same as that of price to market cap, then there would not be the huge deviation between DUA and price as we saw during the 2014 bubble. As far as DUA, we believe it is a better measure of adoption than say, number of daily transactions. Or some other metric. One major reason is mentioned above in that it filters out noise that does not signify or measure adoption.
As far as if it is predictive, I will never recommend that. This is simply informative and anyone can use it as they choose of course. Something to note though is that DUA had been going up for Bitcoins on average. It is new technology undergoing rapid adoption after all. So seeing a sustained drop in adoption might have proven more useful to many in December than many of the other predictive analysis and tools that were being disseminated through that time and even until now. As for lead time, I think it would be informative to see this daily or even maybe every 12 hours. But I again reiterate: this is not investment advice nor should not be construed as encouragement for anyone to use anything here for predictive purposes.