Fair Value and BCH

2019-01-19T13:03:25.000Z Honest Cash

We have grown accustomed to refreshing coinmarketcap.com every five seconds to check the price of our favorite coins. Right now, Bitcoin Cash is sitting at around $130.95. However, the data on coinmarketcap is not good for what we use it for. Price and 'supply' are both flawed concepts that skew the true size of coins and cryptocurrencies relative to each other, and relative to bitcoin.

As a result, when we look at Coinmarketcap.com, what we see is not the true size of individual and the collective cryptocommunity. Rather, what we see is the false vision given to us by these skewed metrics. Starting with price. Price is merely the last average sell price across a bunch of exchanges.

This means if you want to game a coins price, all you have to do is have a lot of money and buy a lot of the coin. You then move your bags to various exchanges, and then coordinate selling activity. The market, responding to whale movements, will do the rest. Why? Because its a simple average. 3 ten's comes out the same as 1 ten and 1 twenty.

Let's look at supply for a second. The supply for each coin is a completely arbitrary number. The developers likely chose it out of a hat sometime at the beginning. Yet, total floating supply is 1/2 of the market cap equation, mk cap = price * supply. This also skews comparisons between coins. Because supply is an arbitrarily chosen number, it has no mathematical meaning. Thus, comparing it to another arbitrary number also has no mathematical meaning.

This doesn't change just because you multiply it by the price; an arbitrary number * a derived quantity = an arbitrary number every time. Therefore, market cap itself is an arbitrary number. This is obviously no good. What's the solution then? Fair value. https://www.coinfairvalue.com

Fair value is a relatively new way to price cryptocurrencies, without relying on BTC pricing. Since all exchanges price alts in BTC, this means when ever there's a big move in BTC, buy or sell, alts move as well. But that shouldn't be so, because each coin is separate from each other. What we're actually seeing is not the actual economies of each coin, but a proxy. Since exchange trades don't take place on chain, exchange data is 'fake'.

But Fair value relies on intrinsic fair values, four of them, to arrive at a price independent of exchange data. Those four values are velocity, basket (avg. tx size), total discounted supply, daily transactions. These values are combined in a mathematical formula that spits out a value. Since this value is completely independent of exchange data, it is remarkable that they are so close.

Indeed, the theory behind fair value predicts that when all speculation is removed, the price and fair value should match. This means fair value is a great way to get an alternative look at the current size of your coin's economy, like BCH's. BCH's market cap is $2,301,318,744, but BCH's fair value market cap is: $7,291,717,485 or 3x the current size you see on CMC.