Bitcoin's Intrinsic Value has never been higher than right now
The amount of energy being put into securing the bitcoin network has never been greater than it is right now.
This measure of value is championed by Charles Edwards (@caprioleio) on Twitter and is now hitting highs never seen before.
Check it out:
As you can see, the price of bitcoin has mostly traded under this Energy Value since early 2018 with only a brief surge above it in July of 2019.
Does Energy Value lead or follow price?
This is the big debate with using the energy value as any kind of investing thesis.
Many think that as the price goes up, it pulls more resources into the network, which would make the energy value a lagging indicator.
However, as Charles points out, it actually doesn't seem to work like that in reality.
In reality, the large miners that are putting millions of dollars into mining infrastructure are doing so based upon a belief where they think demand is going.
Not only that, but according to Charles, history has in fact pointed to the energy value being a leading indicator.
While it may seem counter intuitive, think of it like a home builder...
If a home builder spends $200k building his house, adding up all the labor and material costs, it seems reasonable to conclude that the price of that house should be valued somewhere close to $200k.
It it wasn't the home builder never would have attempted to build it in the first place, at least not one with any kind of planning.
Overall this is a very interesting way of calculating value.
In theory it would make sense for price to lead energy value, but in reality it may be the opposite in the wild.
A good example of "theory" vs. "reality".
Either way, energy value going up and now hitting all time highs is nothing but bullish.
Stay informed my friends.
Posted Using LeoFinance