The Digital Assets Newsletter: Week 3
- ateekberg
- Jan 25, 2022
- 5 min read
Too Long Didn't Read Summary:
This Week's Market Update
A fairly flat week for cryptocurrencies in general. The big question is whether a new bull run is on the way or if the crypto winter has already begun?
On the macro front there are a lot of things happening as well. The correlation between the stock market and crypto is increasing, the internet has been shut down in Kazakhstan, institutional investors are still hungry and soon you will be able to buy an NFT with your credit card! Read more below!
Concept of the Week: Valuing Bitcoin as if it were Facebook
You can define a specific cryptocurrency (in this case Bitcoin) in many ways. One way is to view Bitcoin as a global, independent and decentralized, monetary network. If it is a network, the value should increase as the overall network grows. Consequently, in order to make this concept easy and intuitive, the value of the Bitcoin network and thus a Bitcoin can be valued as if it was Facebook or Tiktok. Read more below!
Investor Joe Update
Find out who Investor Joe is, what he has decided to invest in this week and why below!
Are You New to This Space? Don't Worry! As we have gained a lot of new subscribers we would like to welcome you all to the DAS newsletter! Since this newsletter may contain slightly complex topics and many of you are new to the world of crypto, we invite you to look into our website where we have created a learning section filled with information and sources that you can read and gain a better understanding of crypto assets. Hope you enjoy!
We are not advocators we are educators
This Week's Market Update
The Micro-view: Starting off zoomed in, it's been a fairly flat week for bitcoin (BTC). With a high at 44K and a low of 41K we are seeing some of the lowest volatility ever on BTC with a mesure well bellow 3% on the 30 day volatility estimate (source). Seems that both bears and bulls are sitting tight as the pile of macro factors, such as signs of regulation coming, are now starting to settle. The next few weeks are likely to determine how the rest of this year's market will play out. That is to say if we see the lead up to another crazy bull run or if a crypto winter has already set in and we see a continued downtrend. As always only time will tell.
The Macro View:
The correlation between Crypto and the Stock markets has increased as digital assets continue to see a wider adoption. The IMF (International Monetary Fund) recently spoke about their fear that the increased correlation between stocks and crypto may lead to a dip in the stock market (S&P 500) if the crypto market crash (link to report, it’s nice and short read). Where IMF argues correlation, others argue causation (A & B effect each other v.s. Only A effects B) What do you think?
The internet shutdown parallel to the riots in Kazakhstan are now confirmed to be the government’s action, in order to control the population during the riots. If you are out of the loop here, the TLDR (too long didn't read) is that Kazakhstan has seen a flood of Bitcoin miners enter their nation state after China set a blanket ban on Crypto mining. Therefore the internet shut down resulted in the BTC market crashing as it rendered the miners useless. (Read our previous newsletter here for more info)
As mentioned in last week's newsletter the floodgates of institutional investors (ex. venture capitalists, angel investors, hedge funds etc) are still hungry. This week we saw FTX launching a 2 Billion dollar VC fund for crypto start ups! (yep, it's the same group behind FTX.com)
Concept of the Week: Valuing Bitcoin as if it were Facebook
When trying to grasp your head around how to value different cryptocurrencies, there is no generic truth. How you value a cryptocurrency will be based on not only the cryptocurrency itself but also how you define it. If you define it as a network of users, you can think of it as Facebook or Tiktok. If no one uses it, it has no value and vice versa. How does this work? Valuing a Cryptocurrency such as Bitcoin as if it was Facebook is done by focusing on the network effects. This can be done by using the Metcalfe’s Ratio (MET), which is based on Metcalfe's law. Strange name, I know, but Metcalfe's law essentially states that: "The value of a network is proportional to the square of the number of the network’s connected users." Why is this relevant for a cryptocurrency (most appropriate for Bitcoin)? Bitcoin can be viewed as a store of value, as digital money, as digital property or even digital energy. In its essence, however, Bitcoin can also be described as a global, independent and decentralized, monetary network. Given that we define it as a network, the value of a Bitcoin should reasonably increase as the network grows bigger. Hence, Metcalfe's law helps us understand how the value of a Bitcoin is supposed to change as the size of the network changes. How do you calculate this? Although simplified, the calculation is straightforward: The value of the network should be valued as the square of the number of participants. That is, The value of the network= (Active addresses) ^2 . Read more on addresses here. Hence, the MET Ratio= Current market cap / Daily active addresses Want to dig into the rabbit hole? If yes, this is for you: metcalfeslaw_websiteupload_7-5-18.pdf (caia.org) Thank you for reading and remember that this is only one of many different tools and perspectives available in this space! /Viktor Svensson
Investor Joe Portfolio Updates
For this section we encourage you to click the links in order to learn and understand the investment reasoning and how Investor Joe works.
Who is Joe? We explain everything here.
Previous positions remain unchanged. This week Joe continues his DCA strategy with 100$ split as:
50$ into BTC - Read why
40$ into ETH - Read why
10$ into ATOM - Read why
Investor Joe's Current Portfolio:
⚠️ DISCLAIMER ⚠️ This is not financial advice, and is purely for educational purposes only, always DYOR!
____________
Written by: Erik Gunnarsson Questions? Reach me at
Thank you for reading this far! We hope you discovered something new or interesting. We are constantly striving to improve and would thus appreciate your feedback. If you have any comments, ideas or thoughts you would like to express to us, please send us feedback through the form at the bottom of our website.
DISCLOSURE: SOME DIGITAL ASSETS SOCIETY MEMBERS ARE INVESTED IN CERTAIN TOKENS AND COINS WHICH MAY HAVE BEEN SPOKEN ABOUT ABOVE. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY COIN OR TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.
Comments