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Bitcoin’s Realized Value

Good morning from San Francisco!

Part of your editorial team (Ram) is currently at Blockchain Week in SFO, so Rohit will be mostly pinch-hitting solo on the newsletter with support from Divyang.

Please hit us up if you want to grab coffee today/tomorrow in SFO or Wed/Thu around #Hoshocon, the Blockchain security conference in Las Vegas. Excited to hear the man Andreas Antonopoulos himself.

Also excited to be spending time with Tom Schmidt of 0x and with the team at Dfinity in addition to of course the ever supportive Gokul Rajaram and Anand Rajaraman.

Bitcoin’s market cap was >$300B at its peak, and it’s around $100B now. So, what does market cap signify? It’s simple, ain’t it? It’s a product of the price of Bitcoin and its supply. What is the supply number that you should take into account while calculating market cap? Current or future supply (for example OnchainFX’s Y2050 supply)? Both are widely accepted for calculation of Bitcoin’s market cap, but we feel that market cap which takes into account future inflation is a better metric.

Now there’s another challenge here. We have heard of multiple instances of people lamenting their bad luck (or rather carelessness) about how they lost the BTC they mined when it was still truly a string of alphanumeric characters and nothing else. Now, those lost BTC aren’t going to come back, are they? And, Satoshi’s not going to dump his 1 million coins on the market, unless he’s a ruthless hedge fund manager right? So, should we not be accounting for the lost BTC, which is actually pretty significant, and the BTC that’s hoarded by true hodlers who will never sell?

Nic Carter and Antoine Le Calvez created a new metric called “realized value” that eliminates the effect of lost BTC and provides valuable insights into serious long-term investors are actually buying BTC. Realized value is the summation of the product of UTXOs and the prices at which they last moved. For example, if 1 million BTC were lost in 2011, say when the price was $1, it’s contribution to the “realized value” is $1 million as opposed to their $6.7 billion value in BTC’s market cap, at current prices. One obvious advantage of using “realized value” is that it strips out the value associated with lost coins and the noise from short-term emotional buying and selling by FOMO-stricken flaky investors. Murad Mahmudov and David Puell did further research on “realized value” and plotted it against “market value” of BTC. Here’s how it looks –

Source: https://blog.goodaudience.com/

The “realized value” graph looks much smoother than the Bitcoin “market cap” graph and it clearly identifies the timelines which witnessed accumulation of BTC by long-term hodlers as shown by the step-graph like increase in “realized value.” The flatness of the line that follows the sudden step up in value shows that an insignificant amount of UTXOs were sold relative to the BTC bought during the previous bull cycle, highlighting the Hodlers’ low price-sensitivity to the subsequent fall in prices.

Meanwhile in Crypto Wonderland….

“Use of Proceeds? Charity.” Changpeng Zhao, the CEO of the world’s largest centralized cryptocurrency exchange Binance, has announced that all fees collected from listings will be donated to the Blockchain Charity Foundation. The news comes at a time when certain projects are forced to pay exorbitant fees in order to list on major exchanges and some have publicly complained against this monopolistic practice.

“First FINMA License for Crypto-focused Fund” In what could be considered a landmark victory for crypto funds across Europe, the Swiss regulator FINMA, has granted a license to Crypto Fund, a Swiss blockchain-focused investment fund. Under the licence, Crypto Fund can operate at par with other investment groups and provide investment advice to institutional investors.

“PwC Jumps on the Bandwagon” PwC, one of the “Big 4” audit firms has partnered with cryptocurrency startup Cred to develop a new stablecoin pegged to the US Dollar. The firm hopes to alleviate fears around solvency of stablecoins by providing a solid audit backing to the stablecoin, especially to check that current USD reserves are consistent with the number of stablecoins in circulation.

“Crypto is Centralized” NYU Professor Nouriel Roubini, better known as Dr. Doom for his alleged prediction of the 2008 crisis launched yet another scathing attack on the cryptocurrency community. In a tweet over the weekend, Roubini said that crypto markets remain centralized because “miners are centralized, exchanges are centralized, developers are centralized dictators (Buterin is “dictator for life”) & the Gini inequality coefficient of bitcoin is worse than North Korea”.

“Larsen in Forbes 400” Chris Larsen, one of the co-founders of Ripple has been featured in Forbe’s list of the 400 wealthiest people in the world. Larsen holds around 5.19 billion XRP and XRP’s recent bull following the xRapid launch announcement has significantly increased his value.

108 Token NAV Update

Today’s NAV is ~$1.25, up roughly 28% since launch.

You can express your interest in 108 Token Series II here. This will be an open-ended, rolling vehicle.

Also reach out to us if you are a market maker or a liquidity maker that is interested in a conversation around the 108 Token.

Crypto Twitter Pick

We Are Reading / Listening To

Use regulated stablecoins, get censorship by Tony Sheng

The Secrets of a Crypto Trader featuring Travis Kling

Overnight Performance of Top 10 Cryptocurrencies

In addition to this daily newsletter, you can find more stuff to read at our news and research portal, our crypto index token and our upcoming relayer.

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