Note: This piece is a sort-of follow up to “Comparing Bitcoin and Other Cryptocurrencies by ‘Market Cap’ Can Be Very Misleading.” You may want to read that post before this one. With each passing day, there is more agreement among investors worldwide that the invention of Bitcoin has led to the creation of a new asset class.

The Federal Reserve Bank of St. Louis even indicated as much in an article last week.

Whether the price will continue to rise in the aftermath of historic gains in 2017 is still up for debate, but there seems to be a stronger understanding that this cryptoasset will not simply vanish out of thin air one day. Having said that, there are still plenty of gold bugs and Nobel-prize winning economists who still don’t understand the value proposition of Bitcoin (I tried to explain it to the gold bugs here).

With the creation of a new asset class comes the difficulty of assessing the fundamental, underlying value of these assets. While earnings reports can be used to calculate theoretically fair valuations of traditional stocks, no such data exists for Bitcoin.

A number of different theories for valuing bitcoin and other cryptoassets have popped up over the past few years, but those who dare make price predictions based on some sort of traditional valuation analysis usually end up with egg on their face. #NeverForget #ProfessorBitcorn #Rekt — Kyle Torpey (@kyletorpey) December 5, 2017 Of course, there is one theory that has been around for a number of years now that has been mostly overlooked. Read more from…

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