One of the ways that network companies are valued is by Daily Active Users. For example, if you divide Facebook’s overall market cap by the number of people using Facebook, you get a Value Per User. This is useful if you want to compare, say, social media companies to each other:

Now, we never want to look at any number in isolation, just as a doctor would never send you to surgery based entirely on your blood pressure. There would be a lot more tests, each one yielding another piece of data (and another bill). But an unusually high or low blood pressure reading would be a red flag.

We can also see if Value Per User seems to be in the right range. Facebook’s Value Per User, for example, is double that of Snap Inc. But Facebook also owns Instagram and WhatsApp, so investors likely see more long-term potential in the company. They’re in the same range, and the Value Per User seems reasonable.

Digital assets are a different story.

Using our new Blockchain Investor Metrics spreadsheet, we pulled out the market capitalization of seven of the top seven digital assets, then divided it by the daily active addresses to get the Value Per User.

Here are a few findings:

Bitcoin users are worth about 4x more than Ethereum users. Our team discussed that bitcoin is actively transferring money, where Ethereum is transferring utility—they’re two different kinds of value.

We tried to find an example in the traditional economy. Comparing a payment network (Visa) with a social network (Facebook) might be roughly equivalent to comparing bitcoin with Ethereum. This analysis was tricky, because Visa doesn’t reveal daily active users, just annual transactions. But we might estimate a value per Visa user of about $1,000—or about 4x more than a Facebook user. So calling bitcoin users worth about 4x more than Ethereum users might be just about right.

Bitcoin Cash looks overvalued in comparison to Bitcoin. Why would a Bitcoin Cash user be worth a third more than a bitcoin user? We could argue that BCH is even more payments-focused than BTC, and that the recent price rise is making more people HODL their BCH. But $365,000 per active user? C’mon.

Blockchain Value Per User is crazily high for the value created. This will not be a popular opinion, but bitcoin is far overpriced on a per-user basis ($267,000 per user) when you compare it to Visa (estimated $1,000 per user). Yet Visa processes about five hundred times more transactions than bitcoin, it’s infinitely more useful to both merchants and consumers, and it’s far more trusted than bitcoin.

In summary, we come back to the concept of flow: for an economy to be truly useful, it’s got to have a lot of liquidity, a lot of flow. Like a healthy river, flow measures how fast an economy is moving. The Blockchain Investor Metrics spreadsheet measures flow, because healthy blockchains have healthy flow.

The good news is that once we get blockchain flowing more freely, we’ve got a lot of room to grow. Visa’s market cap is about $450 billion, about 2.5x that of bitcoin. If we can get bitcoin up to Visa’s number of transactions, that would equate to a bitcoin price of about $25,000 per BTC.

The more we flow, the more we grow. 

Health, wealth, and happiness,

Here's one such example of an angry customer...

This type of event is known as a flash crash and they happen fairly infrequently in traditional markets, mostly when there aren't a lot of trades happening. This particular event saw the price of XRP plunge from 34 cents to 14 cents and then back up in a matter of moments.

The Eurozone has been in negative interest rates since 2014 so their actually motivating people to sell it. With the US election coming up quickly, many investors expect the Fed to sit on their hands until at least November and so the Dollar is getting stronger.

Mati Greenspan

Analysis, Advisory Money Management