BITINDEX

In general, the price of an asset often diverges from that asset’s fundamental indicators. Fundamental indicators are contextual metrics that, to some degree, affect an asset’s price.

Price is something like a scoreboard for the fans—easy to see throughout the game, but indicates very little about its outcome (read: 4th-quarter comebacks). For bitcoin, we’ve seen the pendulum of price swing far above of the industry’s fundamental reality to far below.

Well before the boom and bust in bitcoin price, Pantera put together a way to measure the success potential of Bitcoin and the Blockchain (Bitcoin’s underlying technology), despite bitcoin’s price swings. We call it the BitIndex. Totally independent of bitcoin’s price, we believe that the BitIndex best captures Bitcoin and Blockchain industry progress.

The success of Bitcoin and the Blockchain correlates to the degree and scope of their adoption by society at large. “Adoption” here entails:

  • application development interest and diversity,
  • interest in these new applications from traditional financiers, merchants, consumers, and other groups,
  • whether consumer interest is developed or developing nation-based,
  • use of the technology for its features rather than for speculative trading,
  • demand for informational or educational materials, and
  • media virality.

The Pantera BitIndex is not a tool to forecast bitcoin’s price. No series can provide meaningful short-term correlation. The BitIndex is designed to assist us in forming our views on Bitcoin and the Blockchain’s medium-term to long-term prospects. Since the only means of utilizing the technology is through transacting bitcoins, the argument can be made that should adoption of the technology increase, the demand for bitcoins increases in tandem, which could impact price.

The current value of the BitIndex is 525 (this is an index value, not a denomination of any currency):

 

bitindex-nov-2016