Bitcoin has been in a choppy trading range for almost a year now, bouncing between 30k and 65k. The up-or-down debate continues to be a favorite hobby for many, but it’s mostly noise. For Bitcoin, the network is what matters. Let's dig deeper. 🧵

What matters most is where the demand curve is going, and the answer continues to be “up and to the right.” Below we see that the number of Bitcoin addresses (with a value of more than zero) continues to move higher, following a simple power regression curve. /2

In the past, I have compared Bitcoin’s growth to historical S-curves, namely mobile phone subscriptions and internet adoption. A more recent example of a network effect is Apple's rise to network dominance since the 1990s. /3

I am going to take some creative license here, applying Metcalfe’s Law to the Apple scenario. Apple’s network (crudely measured as its trailing sales) has increased 53x since 1996. It’s market value, on the other hand, has increased 1699x. /4

If Apple’s increase in market value should have been roughly the square of its growth in sales (53 to the power of 2), then we get an expected growth rate of 2855x for Apple’s market value. At 1699x, it’s in the ballpark. /5

Apple’s price has grown 1457x since 1996, while its price-to-sales ratio has grown 30 times. (See below.) If the growth in valuation is an exponent of the growth in sales (per Metcalfe’s Law), then price should increase as an exponent of both metrics. For Apple, it has. /6

Now let’s compare this to Bitcoin’s network growth and valuation. Below I show Bitcoin’s price (year-end 2021) and its price-to-network ratio (my attempt at putting a valuation on Bitcoin). /7

Bitcoin’s valuation has increased 867x since 2011, while its price has increased 640,633x. If we apply Metcalfe’s Law and calculate the square of 867, we get 751,111. This is roughly in line with the 640,633x realized price gain. /8

Below is a side-by-side comparison of Apple and Bitcoin. Different animals to be sure, but they follow a similar path as dictated by their network growth. /9

So what’s next for Bitcoin’s demand curve? Below are two possible measures based on historical S-curves: mobile phone subscriptions and internet adoption. They show different slopes, but suggest a similar overall long-term growth path/END