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The most straightforward metric of any crypto coin is its price, usually denominated in US dollars. There are multiple models used to explain why a market price is what it is, but when it comes to knowing what causes Bitcoin’s price movements, for example, there is no clear answer. There are metrics and predictions ranging from pure speculation to pricing based on present and future scarcity. In this article, I’m going to tap into the scarcity of some of the most popular coins to better understand their value.
The scarcity of crypto assets can help build yet another model - value per user. This metric hinges on the potential ownership of a coin based on data for active addresses or other types of unique profiles. Measuring the value per user assumes that all users within the network are interested in the coin’s success. This measure does not point to the realized value of a coin, meaning not all users could sell at the level of value per user. However, it is a good indicator of a network’s value. Each new blockchain with its native crypto asset unlocks both realized and potential value for its users. As such, this metric may be a great tool to evaluate a project’s success as well as inform users about potential investment decisions.
In this article, we compared different coins and projects to test the viability of the value per user model. We picked projects categorized as both coins and tokens to see how the value per user metric applies and what differences can be spotted between various projects.
Bitcoin serves as a bellwether to all crypto assets. Its user base is pseudonymous, with only an incomplete map of who holds coins. More than 3 million BTC are considered lost, locked away, or inactive in some way.
BTC has a total supply of 21M coins and a market cap at $350,838,724,330, as of December 2020. The market cap based on the total BTC supply is above $398 billion dollars.
BTC wallet users are estimated at 30,605,330, although this number does not give us separate physical users, and it is possible to have more than one wallet per person or business.
This gives us a rough value per user metric of $11,630, based on the market price of BTC as of December 1, 2020. The BTC calculation cannot be made for the total supply, because the remaining coins will be mined over the next decades. Hence, the current circulating supply is taken into account.
The problem of BTC estimations lies in the fact that wealth is unevenly distributed. The top wallets carry a significant portion of wealth, and big exchange wallets also skew the distribution. But BTC remains democratic and shows that its value per user remains high.
SocialGood is a charitable project with a hybrid mission of solving economic inequality while democratizing crypto assets. The platform gives users SocialGood (abbreviated SG) crypto assets for shopping at over 1,800 major online retailers worldwide through their apps released in September and November of 2020.
SG's market price is at $3.9134 as of December 1, 2020, after a bullish run toward the end of the year.
The total issuance limit of SG is 210 million coins or ten times the total supply of Bitcoin. This number was chosen deliberately to tailor the coin to the needs of its community.
Because SocialGood is a platform that aims to help those who can't accumulate assets, it has a good grip on its user base statistics. The user base of registered accounts is over 100,000 people (as of December 2020). Based on the above data, we can calculate the coin’s value per user (CVPU). The market cap of SG based on the issuance limit is around $821,814,000. This gives us a value per user of $8,218. This price may fluctuate, but as the amount of users increase, the overall value of the crypto asset will increase as well.
Therefore, if the number of SG holders are constant and the CVPU is similar to Bitcoin, the price of SG would be 44.9% higher than it is now ($11,908 ÷ $8,218). Also, suppose the number of SG holders increases from the current 100,000 to 1 million in the future. In that case, the market capitalization of SG (based on the issuance limit) could reach $8.218 billion. At that point, 1 SG will be worth $39.13 (10 times the current price).
To put it simply, the SocialGood App is an app that distributes SG for free. And how many people would refuse to get SG for free? If the number of SG holders could reach 20 million, it would not be illogical to think that the price of 1 SG would increase 200 times.
Like Bitcoin, SocialGood also has an issuance limit, meaning as SG holders increase, the price of SG will inevitably rise over time as well. Holders of Bitcoin know this concept well, and if that coin's historic rise is any indication of the direction SocialGood is heading, then we all better prepare for the future.
Ethereum is a highly active digital asset, especially after becoming the engine of decentralized finance. Tokenization means more and more users need to hold at least a little bit of ETH to pay for network fees. A total of 126,819,085 unique addresses have been created on the Ethereum network. Matching this with a total market cap of $67,815,701,234 gives us a value per user of about $543.
In the case of ETH, this price is relatively close to the actual market price of the coin, which toward the end of 2020 hovered around $600. The relatively low value per user means ETH behaves like a utility coin instead of a valuable and scarce asset.
ETH is also highly distributed, but its network is not dedicated to any one business plan. Instead, it grows based on secondary projects that need ETH for financing, fees, or as a basis for trading.
EOS is a curiosity within the crypto space. We chose this project for also having a clear knowledge of separate users and even a system of usernames. This is unusual in the world of crypto assets. Still, EOS is a good example to map the value per user metric. The EOS network had 1,500,206 accounts as of October 2020 and the coin’s market cap is $2,877,691,183, giving us a value per user of $1,918. This is much higher compared to the market price of EOS at $3.07.
A coin’s value is not determined by anyone’s model. Still, the potential investor may choose to select a specific type of coin. BTC, as the first and leading asset, sets its price higher in comparison to the value per user. This is suggestive of “whales” realizing much higher market prices in comparison to more democratic wealth distribution.
But some projects have a different goal, like combining a wealth-sharing business model with a democratic coin distribution, such as SocialGood. Because SG coins are tied to retail activity, it is difficult to create significant “whales” that pump and distort the price.
A coin’s value per user may make it clearer as to how an asset actually works and whether it sees significant circulation. In the case of ETH, its utility status reveals usage as a constantly fluctuating asset instead of a store of value. For other coins like EOS, network growth may also mean growth in market price and value, as more users adopt the asset.
There is no way to predict the exact market price of a token or a coin, even if it’s Bitcoin. But there is a difference in choosing an asset that has a clear business model in mind versus the ones seeking a real-world application. In some cases, the value per user metric is a vital tool to gauging a coin’s potential.
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