General Cryptocurrency Outlook/Analysis September 2017

Cryptocurrency Outlook

as of September, 2017

By @P0lar

I am bullish on Bitcoin. I believe that it is significantly undervalued at the moment and that the gains we have seen so far will be blown away. I am basing that opinion on several things. First of all, this cambridge study from May estimated about 3 million active users of bitcoin.

Cambridge Study

A reddit post (to be taken with a grain of salt, certainly) states that Coinbase has seen an increase of 800,000 users in the last month.

Reddit Coinbase User Analysis

On the coinbase site, it says that there are over 10,000,000 active users. Some of these may be duplicate accounts and some may never actually use bitcoin but the number is still significant.

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https://www.coinbase.com/about/

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https://en.wikipedia.org/wiki/Metcalfe%27s_law

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I believe that Metcalfe's Law applies to Bitcoin and I will be posting more about that in the future, but for now the important thing is this: Metcalfe’s Law states that the value of a network has an exponential relationship to the number of users.

Zerohedge Price Analysis

In the above graph, we track the price of bitcoin between May and September. The price is may is $1432 and the price as of today hovers between $4000 and $4500 with an all time high of about $5000. The number of users has grown by 300% while the value of bitcoin has only grown by about 300%. According to Metcalfs law, the price should have increased exponentially so what gives?

This is why I believe Bitcoin is fundamentally undervalued and why everyone who owns bitcoin is still an early adopter. The market cap of Bitcoin at the time of writing this post is about $66 Billion. It just surpassed Paypal. Paypal is a brick and mortar service masquerading as ‘internet money’ and is peanuts compared to what Bitcoin is capable of. Bitcoin is something we have never seen before that has the potential to be as revolutionary as the internet was. Bitcoin will have 3 phases. The first phase involves speculation. The second involves mass adoption and the 3rd has to do with the coin maturing and the blockchain becoming pervasive in everyday life. Right now, we are still in the speculation phase and the concept of the Blockchain as well as the actual Bitcoin is not being used in practical, everyday applications. Phase 2 is around the corner and just beginning. Marine Insurance companies are looking to use the blockchain to help streamline the way insurance works and solve real life problems.

Marine Insurance Looking at Blockchain and Smart Contracts

The Blockchain will soon be used in the UK to help meter electricity. Ripple (XRP) stands to replace the Swift network that is used by every banking institution in the world and handles most of our daily transactions. If Cryptocurrency were to replace credit cards for everyday transactions

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https://www.coindesk.com/us-lawmakers-seek-tax-exemption-bitcoin-transactions-600/

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Credit cards handles trillions of dollars in transactions. For the Blockchain to handle that many transactions, we would require a blocksize of 500MB+.

Reddit Blockchain Size in relation to Credit Card transactions

Imagine what will happen to the price when Bitcoin hits a $500 Billion market cap? It will multiply by more than 10x!

On the subject of gold. People like to say that 1 Bitcoin is worth 3 golds. 3 gold whats? The market cap of gold is 450x+ that of Bitcoin. If Bitcoin were to scale linearly (which it won’t) to the same market cap of gold, we would be looking at a price of over $1,000,000 per bitcoin.

How do we solve the scaling issue? EOS, but I’ll get into that later.

I hope to discuss Bitconnect, Ripple, Steem (obviously :))