Bitcoin

Are We Overemphasizing Bitcoin and the Cryptocurrency?

May 10, 2019 Off Maheen Hernandez By Maheen Hernandez

Eric Kovalak recently stated, “People are trying to translate the value of cryptocurrencies into a traditional model where they’d use something like P/E.”

There is a calculation called NVT Ratio, which is about network value to transactions ratio.  This technically mirrors a P/E ratio for Bitcoin.  However, the creator has to say that this is not always a valuation metric for other kinds of cryptocurrencies.

Mr. Kovalak stated that assigning a value to cryptocurrency is about evaluating the asset versus its philosophy and technology.  The fundamental structure of cryptocurrency should provide for a transparent and decentralized solution.

The digital coin should solve problems, which align with the philosophy or the distributed currency solution. For instance, it has been a challenge for Bitcoin to provide for solving the technological problem of permitting the VISA and Mastercard like volumes of transactions on the network. However, XRP solved this technological issue.  The XRP operates on its private permissioned ledger.

Analysts clearly define the criterion for evaluating cryptocurrency.  The team behind the cryptocurrency is the primary factor.  The experience of the team, the software used by them, the system architecture, and the software development should all be taken into consideration before deciding the competency of the cryptocurrency.  The experience of the manager of the cryptocurrency company will shape the decision of any investment.

The degree of transparency in the public statements matters in a great deal in determining the trust factor posed by the company.  The degree of commitment that the company will have with its partnership depends on its transparency.  The quality of the public news from the company has a lot to tell about what the company values in a great deal.

Fanfare and an increase in stock prices are commonly seen with branded companies talking about their venture into the cryptocurrency market.  However, the fundamental business objective and the primary partnership should make sense.  The organization behind the cryptocurrency should be solving a legal problem.

It is only when the reason behind why a company is in business is revealed, the rationale of the proposed price can be justified.  The reason why the price of a particular cryptocurrency will appreciate over the years should be validated.  Whether about dealing with a mini-crypto fund or major crypto asset, measuring the market capitalization is important.  A crypto investment strategy is arrived based on the stated parameters.

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