When we talk about the value of Bitcoin and we look at the price on the stock market, we are actually incomplete. We would have to talk about the market value of Bitcoin. In addition to this market value, there is also another valuation, the fair value of Bitcoin or other crypto currency. We look at this value for the mother of all crypto and various crypto coins. We also explain what you as an investor can do with this.
Fair value Bitcoin vs market value Bitcoin
To find out the market value of Bitcoin, just take a look at an exchange. You'll immediately see what your favourite crypto coin on the market is worth. However, this flat comparison of supply and demand on the market today is not complete. There is no room in this valuation for future use. In order to include this value-determining factor, they have, in line with other means of investment, created the term 'real value'. For connoisseurs, the coinfairvalue.com site offers a full explanation of this term, including mathematical calculation formulas. To make it easier, the fair values of the Bitcoin and several other crypto currencies, expressed in Dollars, have been calculated and compared with the market value.
In the overview below you'll see the fair value of the Bitcoin and the top 10 crypto coins in dollars, compared to the currently (21.10 hours on December 18) applicable market values.
Fair value Bitcoin and top 10 crypto points vs. market value (Source: Coinfairvalue.com)
Fair value Bitcoin lower than market value?
If the market wants to pay more than the fair value, this indicates that either the currency is overvalued. In that case, a price correction seems a logical next step. In addition, the market may see signals that are not the result of a technical analysis. In that case, speculation is based on positive news expectations.
Conversely, it cannot be said that there is a 'bargain' if the market price is lower. Here, too, various other factors (e.g. as shown by a fundamental analysis) may play a role. However, the M/R ratio is seen as a powerful indicator.
What does this value of Bitcoin say?
The fair value of Bitcoin, together with a number of other indicators, does give an impression of the future value development. As long as the ratio is lower than 1, this means that the fair value is higher than the market value. Owners of crypto coins don't have to worry, because there is still room for growth. If other analyses also give a bullish signal, the chance of a positive price development is high.
When the market value is higher and other indicators give a bearish signal, this is an additional sign that the market is heading for a correction and the currency appears to be overvalued.