Unlike Stocks and Bonds, Bitcoin is very difficult to value because there is no fundamental value attack to the cyptocurrencies in general. It is very difficult to determine the value of the bitcoin and how exponentially it will grow in the future. According to (Kristoufek, 2013) the price of the bitcoin cannot be determined by the economic theories such as the inflation, stock exchange index, interest rate parity etc. He thinks that the euro-dollar exchange rate has a particular impact on the price of the bitcoin. According to the (Bouoiyour, 2015), the demand of the bitcoin is affected by the value of the bitcoin as a medium of exchange for the goods and services whereas the value of the paper currency is affected by both its intrinsic value as well as the value of the currency in the future exchange. The supply of the bitcoin is limited and daily certain amount of fixed bitcoin is added into the system.
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Robert Metcalfe proposed that the value of the network as the square of the number of the users (Metcalfe, 2013). Both the social media network such as Facebook and later Tencent follow the Metcalfe law. It is possible that the network without any cost as well as the barrier may follow the Metcalfe law. He also determines the relationship between the growth of the network relative to the time to which he termed as the netoid function (Metcalfe, 2013). The author (Alabi, 2017) did see the bitcoin price is following as suggested by the Metcalfe law.
In the above figure you can see that the number of the transaction per day is above to hundred thousand and the number is constant increasing after the price crash after Dec 2017. The value is equal to the value which was in mid 2016. The one of the main reason for the price of the Bitcoin to decrease was the limited number of the Transactions per second. Previously there was only 6 transactions that can be send per second. Due to which the transaction fee rose up to $20 per transaction. If the transaction price was kept low then it stuck in the network which result in the unconfirmed transactions and it remains there for a few week. Finally this problem is solved by lighting network in the bitcoin.
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Conclusion:
In order to the price to rise istitutional investors should invest in the Bitcoin. As the Bitcoin ETF accepted in the future the fund manager will also invest in the Bitcoin which will automatically increase the price of the Bitcoin as its supply is limited. So, we should hope for the best.
