Bitcoin (BTC) and Ethereum (ETH) Are Currently Oversold According to Placeholder VC Investor


2018 has been a very hard year for Bitcoin (BTC) and virtual currencies. Bitcoin lost around 80% of its value since its all-time high and other altcoins dropped even more than 90%. However, there is a venture capitalist that shows that Bitcoin and Ethereum are currently oversold from a fundamental standpoint.

Bitcoin and Ethereum (ETH) experienced wild fluctuations of their price during the last few weeks. Bitcoin reached a price of $3,300 and Ethereum was traded close to $83. Both of them marked new year lows. Due to this negative situation that the whole market is experiencing, analysts are not particularly positive about the future of the space.

Despite this, Chris Burniske, a partner at the New York-based venture capital firm Placeholder, seems to be more optimistic about the price of these virtual currencies. In a blog post uploaded on December 9, he says that the fundamentals of quality crypto networks are down less than prices.

In order to determine the value of a specific network, he aggregated different characteristics of both of them. For Bitcoin, he used the number of daily transactions, the estimated daily transaction value, and daily unique addresses used. For Ethereum he used the number of daily transactions and the gas used by the network.

He went on explaining that Bitcoin is processing around 250,000 transactions per day and Ethereum 500,000. He mentioned that both charts have a clear divergence in which the network value continues to slide but daily transactions remain stable. About it he wrote:

“From peak, Bitcoin’s and Ethereum’s network values are down 81% and 93%, respectively, whereas daily number of transactions are only down 41% and 52% respectively.”

Burniske shows that both Ethereum and Bitcoin are oversold. He says that the charts show that Bitcoin is moving value and Ethereum is processing smart contract computations.

Their network values are down 81% and 93% respectively but the demand for their functionalities is down 74% and 7% respectively.

“Bitcoin continues to regularly process over a billion dollars in transactional value a day, and it’s clear how tightly the orange line of this fundamental is coupled with price,” he wrote. “Meanwhile, developers and consumers using Ethereum’s smart contracts continue mostly unabated, as witnessed by another divergence between this fundamental and network value.”

He then compared the has rate of the network with the network value. Burniske says that Bitcoin and Ethereum’s hash rates are higher now than when they were at the time they peaked. This fundamental is still outperforming price.

He ended the article by saying that there are no clear models used for virtual currencies and how to quantify the fundamentals behind them. Additionally, he marked that there is no such a thing as ‘the Bloomberg of crypto’ to gather data and information.

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