Here's the [ formula ] I use:
Bmo = N x A
Bmo ~ total value bitcoin M0 (also called 'market cap')
N ~ total number of entities holding bitcoins
A ~ average Amount of value holding entities are willing to hold in btc
It appears likely that N is only going to keep increasing for the forseeable future (perhaps with exponential adoption rates at times).
A will stay around the same but also may increase as the confidence in holding value in btc becomes firmer.
You can let N to be any number of people, as long as it includes all people holding bitcoins in some time interval of interest and A is the average over that same set of people.
So, let N be the number of all people who have held some bitcoin at any time since January. Then N is fixed.
The Bmo of bitcoin has fallen 50% since January. Therefore A must have fallen by that much, too. So much for "A will stay around the same".
The formula is problematic also because it does not take into account the dynamics of BTC investing. It seems that most of the extant bitcoins are held by "old" inactive investors, who are confident enough to hold them for a while longer, but were not confident enough to buy more coins over the last year. (If the price keeps falling and they eventually decide to sell at 100 $/BTC, their old bitcoins would still have been a great investment, but any bitcoins acquired over the last year would have been a terrible one.)
So, the contribution to the A factor of those old investors does not depend on their confidence in bitcoin. Rather, the amount of
BTC that they are willing to hold is constant, and the amount of
value that they are wlling to hold in BTC varies according to the market price of BTC, as determined by the Chinese traders.
In that case the value of A does not determine the market price, but is passively determined by it -- making the formula useless as a predictor of price.
it'll pick right up once we go above that
