2024-02-13 11:28:08 ET
Summary
- Bitcoin's health can be evaluated through metrics such as market capitalization, conversion points, user experience, and legality.
- The number of conversion points and the ease of use for Bitcoin are important factors in assessing its value and utility.
- The development pipeline for layers and companies building on top of the Bitcoin base layer is very strong at this time.
When investing in bitcoin ( BTC-USD ) as an asset, or companies that build on top of the Bitcoin network as part of an asset mix, we need some set of metrics with which to evaluate the progress of the investment thesis, and by extension, the health of the Bitcoin network.
It's more than just a price on a chart; it's an open-source network with millions of users, thousands of developers, hundreds of companies, and several ecosystems built on top of it. Most Wall Street analysts and retail investors haven't actually used a bitcoin wallet, taken self-custody of the asset, sent it to others, and/or used it in various ecosystems, and yet doing so is very helpful for fundamental research.
Bitcoin means a lot of different things to a lot of different people. It enables portable savings, censorship-resistant global payments, and immutable data storage. If you're an American or European investor in high quality stocks and bonds, and are not thinking about the Bitcoin network from the perspective of a Nigerian, Vietnamese, Argentinian, Lebanese, Russian, or Turkish middle-class saver for example, then you've not yet fundamentally analyzed the asset's use case.
And on top of that, people assess the health of the network in multiple different ways. If Bitcoin doesn't conform to what they want it to be, they might conclude that it's not doing well. On the other hand, if Bitcoin fits exactly with what they want, then they might think it's doing great even if there are plenty of frictions remaining to be solved....
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For further details see:
Assessing Bitcoin's Fundamentals