Crypto Market Supply and Demand
The price of any asset, whether it is fruit and vegetables or crypto stocks, is determined by the intersection of supply and demand. For example, if tomatoes are scarce due to a flood, the price in the supermarket will inevitably be higher — just as it will be higher if, with the same supply, twice as many people want to buy tomatoes.
In the crypto market, if supply is unlimited, the price is not changed by demand. This is the case with mutual funds, such as dot crypto, scale ai, and crypto..com, where more subscribers wanting to buy the fund will result in more shares being issued at the net asset value (NAV).
However, when demand exceeds supply, as in the case of elon musk crypto, elon crypto, elongate crypto, d2t crypto, or crypto app, the price of the crypto asset will increase.
Crypto Assets and Price Fluctuations
For example, let’s suppose a fund has a capitalization of $100 million, made up of 10 million units at a value of $10. If an investor wants to invest $10 million, 1 million units are issued at a value of $10, and the capitalization of the fund becomes $110 million.
It would be a different story if the shares available were limited to 10 million, so anyone who wanted to buy the shares would have to find someone willing to sell them. In that case, the price might no longer be $10, but it would depend on how much the buyer was willing to pay and how much the seller wanted to earn. It would create a situation in which the price fluctuated according to uneven supply and demand. If a crypto asset such as dot crypto, elon crypto, or crypto.com was in high demand, obviously, the price could go much higher than the correct price.
But how can you estimate the correct price?
In 2021, I published data that attempted to estimate the fair value price of Bitcoin, illustrated in the graph below. It suggested that in June of that year, we had reached a relative maximum for Bitcoin (BTC). (I hoped at the time it would not prove true, but it did.) How had I estimated this value?
Crypto Fund Estimation
The example of a fund helps us to understand the logic behind the estimation of its capitalization. If the capitalization of a fund is the result of the number of units multiplied by the NAV, it can also be estimated by the number of investors and the average amount held by each investor.
Using crypto.com, scale ai, dot crypto, crypto stock, crypto app, d2t crypto, elongate crypto, elon crypto, crypto death, elon musk crypto, we can estimate the capitalization of Bitcoin by calculating the average amount held in each wallet and the number of wallets in circulation. Then, by dividing the capitalization by the number of Bitcoin in circulation, we can derive its price.
Cryptocurrency Wallets and Price Estimation
Thanks to the blockchain’s transparency, we can collect a lot of reliable information. For instance, we can easily track the number of Bitcoin addresses with a non-zero balance by running a network node.
The graph shows that the average wallet balance (in US dollars) fluctuates due to supply and demand (many wallets contain Bitcoin without moving it). Thus, if we take the 90th and 10th percentiles, we can estimate the Bitcoin price.
Once we have estimated the growth curve (on a logarithmic scale) of wallets in circulation, it is possible to determine a range in which the Bitcoin price should move.
This model is simple but powerful: we cannot know if a user owns different addresses or if a single address is owned by multiple users (e.g. an exchange’s cold wallet), but we can trust these relationships, particularly when we look at large numbers and a complete price cycle.
The Potential of Crypto Assets
In the midst of a crypto winter, like the recent months, we have seen a notable increase in withdrawals from crypto exchanges and a decrease in balances held in these centralized platforms. This signals a preference for investors to hold a long Bitcoin position in the long term, rather than in a trading account for short-term speculative opportunities, which is seen as a more dangerous option. This is reflected in an increase of addresses controlled by individual persons, which may indicate a cyclical price appreciation.
Data from this model suggests that Bitcoin could reach its next ceiling around autumn 2025, estimated at $130,000, or even higher. This prediction is backed up by other predictive models, and the recent surge in interest from institutional investors like BlackRock — the world’s largest asset manager, which is seeking approval for a Bitcoin exchange-traded fund — may be a sign of faith in these models.
It is important to note that this forecast is not financial advice and should only be taken as an expected value with a certain degree of confidence.
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