Entering text into the input field will update the search result below

Bitcoin Value Indicator - August 2018

Aug. 01, 2018 5:56 PM ETBitcoin USD (BTC-USD)COIN-OLD, GBTC34 Comments
Hans Hauge profile picture
Hans Hauge


  • Network fundamentals made modest gains in July.
  • Future tech made progress by leaps and bounds, especially the Lightning Network.
  • Based on historical trends, Bitcoin is still overbought.
  • The impact of an ETF could be a game changer, heavy speculation has already begun.
  • I'm launching a marketplace!

Network Fundamentals

If this is your first time reading a Bitcoin (BTC-USD)(COIN)(OTCQX:GBTC) Value Indicator report, you may want to refer to the original article to get caught up. The long and short of it is that I suggest that we can know something about Bitcoin's market cap by looking at the network fundamentals since they have shown correlation in the past, but this relationship is not guaranteed to be as strong in the future due to changing market dynamics and new technology.

Number of Confirmed Transactions

The total number of confirmed transactions increased by 6,393,536 in July. This gives us a daily average of 206,243.

Data Source: blockchain.com

What's interesting about this to me, is that it represents the fourth straight month of growth in monthly transactions. Look at the chart below, and note that March of 2018 shows the low point of transactions. This growth is modest, but I consider it an important sign of life.

bitcoin tx monthlyData Source: blockchain.com

Number of Unique Addresses in Use

The average number of unique addresses in use for the month of July was 438,867. This is a modest gain from June, but still slightly below May.

Data Source: blockchain.com

Network Hash Rate

The average hash rate of the Bitcoin network rose from 37,377,891 TH/s in June to 39,735,959 TH/s in July. The network hash rate predicted a market cap (average) of $97 billion for Bitcoin, compared to $121 billion that we actually saw in July.

This was the closest predictor of the three. I expect this figure to grow more slowly in the coming months, as mining profits have been squeezed by the combination of low fees (due to lower traffic and increased SegWit usage), increased hash power, and lower bitcoin price.

Signal Breakdown

Indicator Name Unique Addresses Hash Power Total Transactions

This article was written by

Hans Hauge profile picture
Principal Quant at Ikigai.

Analyst’s Disclosure: I am/we are long BTC-USD. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (34)

@Hans Hauge - I received an advert from a newsletter vendor talking about the dollar being replaced by SDRs (basket of world currencies) end of this year and their issuance using some kind of blockchain sounding process. The terminology was crypto-like but definitely trying to avoid sounding like a crypto currency.

Now that could be the "coin" of tomorrow. FWIW-it doesn't sound unlike other ventures done by volunteers who are pushed out of the way by big money people. That is, it could be forseen that bitcoin is replaced by an SDR coin. (Edited)
Hans Hauge profile picture
Interesting find wbigly, and I wouldn't be surprised if SDR coin does become a thing. However, if it does happen, I'm certain it won't be open source, trustless and permissionless. That's the edge that BTC has, and I don't think people will see SDR coin as a perfect substitute, just as a way to go cashless using blockchain as a buzzword. But, I guess we'll see.

Thanks for the heads up.
I find your articles very informative. I am wading into crypto and wonder if you have any thoughts on Cryptassist?
Hans Hauge profile picture
Hi Mgmitchell5071,
Unfortunately I do not participate in ICOs anymore. There are simply too many to keep track of, and the failure rate is very high. Sorry I can't be of more help here. Thanks for reading.
Hans, I find you
Just a quick mention, take out all the technical variables for a moment, scarcity alone will also be a factor driving the price up.

My long-term approach is to make sure my decendents have a plentiful amount of bitcoin as difficulty and scarcity significantly rise.

I know, I know, 2140 is a long ways away, but at some point bitcoin will have a higher adoption rate.
Hans Hauge profile picture
Have you seen this?


PS. Only invest as much as you're willing to lose, this is still an experiment after all.
Sweet! Honestly, man, I feel lucky to have this opportunity...lucky to be alive during this time.

I'm taking a shot and bullish long.

tx for your insight
$400M loss on the Hong Kong BTC exchange this AM resulting in forced sale, they were professional traders so able to cover
@june1234 - thanks for the head's up.
Thanks for the always interesting articles. One thought comes to mind. What happens if the price of Bitcoin falls below the cost of mining? Will transaction fees automatically rise? Is this built into the system? If so, how much are they now and how much would they rise if say, bitcoin fell to $2000 (which should below the current lowest cost of mining worldwide). If transaction fees don't rise, what happens if miners decide to stop mining?
Hans Hauge profile picture
Hi Jester5,
The cost of mining is tricky, because it depends on the number of participants and each has a different cost structure. Furthermore, even though the majority of miners are running the same equipment, there is some variety of mining machines being used, so that makes it even more complicated.

If you look at what it cost to run a single machine right now, the break-even is $0.13 for power at this difficulty and price level. See below.


If the price goes down, the margins gets squeezed. New new equipment comes out that's more energy efficient, then the price to mine a Bitcoin would drop etc.

What's happening now, is that miners with higher cost structures are either mining at a loss, or just selling off their equipment to people with lower cost of operations (primarily power).

However, if the network hash rate dropped, it wouldn't be the end for Bitcoin, because difficulty of mining just drops as the hash rate drops. The thing that would happen, is that Bitcoin would become easier to attack. However, since Bitcoin is the largest computing network in the world, it would take a long time of declining hash rate for it to become practical to attack the Bitcoin network.

Fees are just a function of traffic related to block size. So, if there's room for 10 transactions in this block, and 11 people want to transact right now, then the person paying the lowest fee has to wait for the next block and the other 10 get in. So, people bid against each other for block space.

The idea is that eventually the miners could be supported by fees in the year 2140 when all the Bitcoin are mined.

"what happens if miners decide to stop mining?"

Well, the thing is as long as people are using Bitcoin then there will be mining. This is because the network activity keeps the price from being zero, and the block size keeps the fees from being zero, so there's always money to be made. Even if the margins are low, some miner somewhere will be mining, even if it's off power they're stealing from the grid using equipment that's already paid off (they have no operational costs).

I wrote an article about how to know if Bitcoin is actually dead. It goes over some of this stuff. You might find it interesting.

What to do when the electricity and cooling costs rise? Some type of renewable energy like solar? Mine in Antarctica?

Curious what you think.
Hans Hauge profile picture
Correct, moving to a colder climate is an option. Also, solar and wind are now the most cost effective form of power, so I see a future of energy abundance. We're just in an awkward transition phase right now.


This is where our buddy Elon Musk might be able to help out...
Lance Brofman profile picture
In our report from January 2018 seekingalpha.com/... we pointed out that digital cryptocurrency would eventually replace money as we know it today. But before this would occur we also suggested that government would take control of the cryptocurrency universe. Government would then know the exact real identity of all blockchain wallet owners, giving government knowledge of all transactions. Government and banks, central and otherwise, would then be the sole creators of the cryptocurrency and would control the amount outstanding.

The first step in how governments might get involved could involve cashing in on their names and status. Already there is a patent pending "Systems and methods for managing and processing transactions where legal tender status may be established for cryptocurrencies". This would allow cash hungry governments at the national, state, and even local level to obtain income from cryptocurrencies without financial risk. Russia and Turkey have floated the prospect of a national cryptocurrency and Venezuela has actually launched one called the Petro. The price of one Petro is pegged to the price of one barrel of Venezuelan oil. The main purposes of the Petro were to evade sanctions and raise desperately needed cash. The Venezuelan government has already defaulted on debt so trusting Venezuela to honor its promise with regard to the Petro would seem no less risky than trusting it to pay interest on its bonds.

The challenge all cryptocurrencies face is attracting miners who use the crypto of choice for transactions, as a store of value, or as a speculative instrument. There is a need for each crypto to devise some feature that allows for a market share gain over others. It is presently unlikely that a crypto directly issued by a government or a central bank would receive immediate wide acceptance since the major original attraction of cryptos was that they were independent from governments or central banks. However, a crypto that had some element of legal tender status would clearly have a competitive advantage over its competitors.
We think the eventual replacement of paper money with a digital crypto could involve municipalities issuing what might be described as a put warrant. This is a security that gives the holder the right (but not the obligation) to sell a given quantity of an underlying asset for an agreed upon price on or before a specified date. A typical put warrant issued via blockchain methodology by a municipality would allow the holder to use specific cryptos to satisfy obligations to the government at a specified exchange rate, which is the strike price.

An example of such a transaction might be one in which a municipality issues a crypto put warrant with a market price of $1000 and a strike price of the warrant at $100. This gives the holder of the warrant the right to put to the government one unit of cryptocurrency and be credited with $100 as payment for taxes. This theoretical warrant is far out of the money and would likely never be exercised. The worst case for the municipality is that the crypto's value falls to zero sometime in the future. This would cost the municipality $100 at some future date as the warrant reduces the holder's tax burden by using one unit of cryptocurrency to satisfy all or part of its obligation to the municipal government. However, the municipality had initially received more than $100 in return for issuing the warrant so it will always benefit or at worst break even. The cryptocurrency that first aligns itself with a municipal government will likely be a winner during the period that the transition to a digital currency gradually occurs. That particular crypto would enjoy a first mover advantage in a new world monetary order.

We agree with GS that Bitcoin is not a fraud. To some extent cryptocurrencies comprise an asset class different from any that has ever existed before. GS and their clients appear to be applying Modern Portfolio Theory and the Capital Asset Pricing Model, which says that the most efficient portfolio is one that includes all possible invest-able assets. Current portfolio theory textbooks, now indicate that all invest-able assets should include collectibles, art, real estate, bullion etc. A consensus among those in the financial theory community that cryptocurrencies are an asset class that makes a portfolio more efficient, could provide a boost to cryptocurrencies. A thing to keep an eye on is whether other major financial market participants follow GS with regard to the cryptocurrencies.

Despite claims by some, we have not seen any methodology which can be used to arrive at an intrinsic value for a cryptocurrency. This is certainly an impediment to cryptocurrency achieving the status of an asset class that would routinely be included in well diversified portfolios. The next major event in the cryptocurrency space will likely be the integration with cryptocurrencies by state and local governments. This will involve quasi-legal tender status being obtained by some cryptocurrencies, in that under some circumstances, cryptocurrencies could be used to satisfy obligations to state and local governments. It is not clear if this will provide a boost for the entire cryptocurrency space or result in distinct winners and losers among the cryptocurrencies. In order to integrate with the public finance issuers, cryptocurrencies will have to provide financial incentives to the cash-hungry state and local governments. The winners and losers among the cryptocurrencies may, in a large part, depend on which particular have the ability, willingness or political connections to be among the earliest to achieve quasi-legal tender status via integration with state and local governments..."
Hi. While I am not a big crypto advocate I like to read interesting articles that offer information that goes beyond “you don’t get it” or “it’s like investing in the internet in the 90s!” I am just trying to understand crypto better. Very informative article that explores several methods to explain valuation and price movements. First I have seen with info like this. Good work.
How do we even know a ETF will be approved? Or approved in the next 5 years? Seems like the same struggles are holding it back and won’t go away. I think it will happen, but w major concessions (regulatory) that will go against what “they” say crypto is all about. Anyways I enjoyed your article. Thanks.
Hans Hauge profile picture
Thanks for reading and for your supportive comment.

In regards to the ETF, you may be correct. The ETF does go against the Bitcoin ethos, and I think it's not necessary at all for Bitcoin to be a success. If it happens, then there will be a one-time shift; but I can see why the regulators are hesitant. Just look at the insane manipulation that's going on right now, specifically with BTC/Whatever trading pairs on exchanges.


Regardless of this, I consider Bitcoin to be the most interesting experiment that I've ever been a part of because it somehow gets at the intersection of trust, money, cryptography, computing, networking, and most importantly the impact of technology on society.

@Hans Hauge - thank you for discussing the subject of manipulation and identifying its impact on the crypto markets.

in a previous article, you mentioned SA staff saying that an article was a "how-to" style and should be re-written. too bad. From time to time such articles are very helpful.
Hans Hauge profile picture
I agree, but I have also noticed that each editor has their own set of standards. Perhaps a different editor would have let it pass, cheers.
soajustice profile picture
Bitcoin ETF is going to cause so many retail investors to lose money it's not even funny. If retail investors can buy Bitcoin on a brokerage platform like TD/Schwab which will make buying so much easier and efficient vs current alternatives, they will naturally pile -- resulting in the next euphoric run-up followed by the next Big Short 2.0. Wall Street doesn't care about the BTC dream, they only care about making money.

"Based on historical trends, Bitcoin is still overbought."

Technically speaking, momentum is too the downside -- $3K is very likely over the next 6 months. www.theverge.com/...

I'd be a buyer at $3K for a trade only, this isn't an investment.
If you bought at 3k and only looked to trade and not hold as an investment, I’d have to question your investment advice. The article referenced is old news. But, there’s always the possibility the crypto market implodes. I’m betting it doesn’t. No doubt it’s slow motion gambling, but all indications are the house won’t win.

you might give this a read to gain a little better understanding of bitcoin:


Bitcoin is essentially the hardest money that has ever existed. The hardest money, throughout history, wins. There is a great book describing the history of money and Bitcoins potential place in the future of money, called "The Bitcoin Standard", by Saifedean Ammous.

I too was a sceptic until I got educated.
soajustice profile picture

I don't give "investment advice." I post my "trades" here on StockTalk for everyone to see: perhaps you should check out my recent trades, specifically on my FB short = +500% gain in two days (hate to brag).

BTC doesn't excite me at all. See you at $3K.
Congrats on the market place! I look forward to your insight.
Hans Hauge profile picture
Thank you.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!


SymbolLast Price% Chg
Market Cap
Volume 24h
Volume $ 24h
Compare to Peers

More on BTC-USD

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.