Metcalfe's law and cryptocurrency.

Robert Metcalfe

The co-founder of Ethernet, as well as 3Com, Robert Melancton Metcalfe, stood behind the birth of so-called Metcalf's law. It was first mentioned in the 80s of the last century, but it was officially formulated in 1993. The relationship reflects the dependence of networks (telecommunication, internet, telephone) and number of users.

It is logical that the larger the network (the more users have), the greater the value. The question, however, was how much the value would increase. And it was Robert Metcalfe who found it to be exponential growth. Very simply said network value is equal to the second power of the number of users.

In the classical economy, that does not apply. If the number of inputs increases, the product of each additional input decreases. If we want to explain this example, imagine the situation when you get to dig up a channel. If a friend comes to you, you can dig a channel twice more quickly. However, another increase in people who would be kicking the channel will not get a 4-fold or even 8-fold increase.
Metcalf's law and cryptoms

If anyone decides to apply Metcalf's law, the results may surprise him. From 2015 until May of last year, Bitcoin's price development and number of purses matched exactly with Metcalf's law. But in May, Bitcoin, but also all cryptos, began to grow too fast. He has so much deviated from Metcalf's law. For example, in December, according to the Metcalf Act, the value of one Bitcoin should be around $ 3,000. But we all know that Bitcoin was sold at $ 20,000 at the time.

Interestingly, Metcalf's law was known to apply very well to network growth, such as Facebook or Tencent. For nearly two and a half years, the law also applies to Bitcoin. However, at the end of the year, Metcalf's law should have warned us that Bitcoin was overpriced, almost 7 times. Corrections that came at the beginning of this year have downgraded prices significantly below, and so Metcalf's law can indicate that Bitcoin is booming at the right value.
conclusion

Whether you control Metcalf's law will only be left to you, but under certain conditions it can serve as an appropriate tool to control market development and BTC prices. Certainly you should not have Metcalf's law as the only indicator for market development.

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