What are some good metrics for cryptocurrencies?

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What are some good metrics for cryptocurrencies?
asked

What are some good metrics for cryptocurrencies?

Everyone seems to quote and just focus on 'market cap' (price*total volume) but this seems to be of pretty limited value metric that doesn't offer any good insight, particularly if you want to have a measure of the relative utility or use of a cryptocurrency and or token. Can anyone suggest some alternative metrics for tracking and understanding value of tokens

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– use cases
– if its actually being used
– competition
– leadership (if any)
– expenses (salaries, marketing, etc) if behind a company
– if it had ico
– how much % of the tokens the creators hold and move (satoshi hold a good chunk if bitcoin but wont likely ever move them)
– inflation rate
– hash rate
– first mover advantage
– what industries it could eat
– if its a protocol or not

Metrics for cyropto currencies are ultimately, the same as physical currencies. Any unit physical or cypher, must satisfy three elements to a currency

1) unit of account

2)store of value

3) medium of exchange

In general the main factor currently limiting cyropto currencies rise as a viable alternative to physical is the lack of a lender of last resort to respond to unexpected and sudden increases in money demand

@Phil Moshidi

Hi Jones,

The metric here means what methods or data you would use to quantify the worth of a cryptocurrency, speaking from the perspective of an investor who is interested in earning a good amount of return. Most people would consider their marketcapitalization, which is essentially the current price times who much the crypto is traded (volume) at a point in time. The volume itself is a good measure, you can break it down further to assess buying and selling volumes to understand the direction of the price. Can you think of some metrics like these an investor can use?

Hi,
You can use PQ = MV
M = nominal amount of money a.k.a market cap = # of total circulation (n) * price of single coin value (p_)
V = velocity of money = likelyhood invidivadul transfer coin (l)
P = price level or equal to “1” in Bitcoin
Q =index of real expenditures, or amount of value transferred across network

price of coin =1/l

If there is 100 bitcoin transfer in 1 day, I = 1800/total coin exists, the price is total coin exist/100 = $10141.7 more or less.

I hope it helps you to understand the value behind the bitcoin or crypto currency. You can reference below to read more on how to actually calculate the value of bitcoin.

reference:
https://www.buybitcoinworldwide.com/how-many-bitcoins-are-there/
https://charts.woobull.com/bitcoin-velocity/
https://charts.bitcoin.com/btc/chart/velocity#5ma4
https://www.technologyreview.com/s/610614/how-network-theory-predicts-the-value-of-bitcoin/
https://poseidon01.ssrn.com/delivery.php?ID=754103009004067116097090119027096111121055086045016032125103088098082076089113116076096031059124007061000024000121094125098078024041045040023015010125084118127069041086007025092094083083067127071026095086006114069121109111113065018091089082117067029&EXT=pdf

There are several ways to look at this. 1) Are you going to use the token as a blockchain currency, like gas, or eth, to run dapps. If that is the case, then the only metrics that matter are utility and availability – will I be able to get the currency when I need to interact with the blockchain, how much will it cost, and will it be useful and support a large number of users? 2) Are you buying cryptocurrency to use as currency, like bitcoin, or the many btc sidecoins? Then, is this a long-term or short-term transaction? If you are just loading up on btc to use for your summer trip to Europe (short term) then you really just care about volatility. You don’t want to put a bunch of money you’ve been saving for the past year into btc and then watch it tank before you ever get on the plane. Long term, such as for investment, you don’t really care about volatility, it is more about the infrastructure, acceptance, market cap, and the mechanics behind controlling the supply of the cryptocurrency. One other thing that could be very important is currency control. For example, you don’t want to be invested in a currency that the founders suddenly decide they want to double the coin supply in circulation to tank the price. Control of coins/tokens in circulation should be covered in detail in the white papers. Probably one of the biggest factors to look at is utility. If a token is created, and it doesn’t do something that people need, or represent something that people value, then it will not last, and I would steer clear. If something is needed or valued, it will gain widespread acceptance and grow. For me, I think the best metric, at least to narrow the field, is utility.

Ultimately, these are user base tokens, with few exceptions. Look at snapchat, Instagram etc. They are valued in the tens of billions. We could replicate those apps in a few weeks. The user base is where the value is. When Facebook paid $1 Billion dollars for Instagram in 2012, they weren’t buying the app – they were buying the user base and it’s growth curve. In hindsight, they got a hell of a deal.

There’s a reason the Bitcoin price is correlated closely with NVT ratio (a measure of transactions to market cap)

How do we measure user base?

1. Is there an existing one? Ie KIK? In 2018 We saw many tokens like TRON attempt to buy their userbases to bolster a token (BitTorrent acquisition for example)
2. Is a token being built out across a platform/brand/trend which has a quantifiable trend?
3. Measuring # of wallets, # of transactions, size of transactions
4. NVT ratios or derivatives
5. Network effect – Is there an edge in a particular market/demographic/geographic area which is growing? IE india? China? North America? Fintech products will grow faster in a market that is transitioning from 2nd to 1st world. The unbanked/unerbanked are going to need products at a faster rate than entrenched economies like the US.

Liquidity

From a pure price standpoint, tokens have no value without liquidity. Who provides the liquidity? Exchanges. How many exchanges is a token on? Outside of exchanges, is their support from crypto ATMs, and early adopter merchants?
From a “red flags” standpoint, the fundamentals on token supply go without saying. Obviously having a token that can be issued without limits factors in negatively, and on the other hand one with built in deflation in supply such as BTC (halving) is a huge positive.

Advertising

Social media channels – how active is twitter, telegram, their website etc. Standard social media metrics are applicable here
What capacity do they have to market their product, whether is be a pump on a shitcoin or more fundamental use cases being pitched B2B? A great example is the Ethereum Foundation.

Network is everything, combined with how “sticky” that userbase is. Fundamentals, for now, are few are far between and difficult to quantify. So using measures to determine the existing+potential userbase, then qualitative ones (product offering, unique value proposition, competitors etc.) to evaluate the likelihood users will stick around are essential to valuing any token project.

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