Bitcoin Cash (BCH) Activity Valuation Analysis

December 17, 2018 / by Ronald Tichenor

Since Bitcoin Cash’s (BCH) difficult divorce last month from Bitcoin SV (BSV), its valuation picture has improved significantly, but it took a lot of damage to get there.

In early November, about a week before the Bitcoin Cash fork, we looked at the valuation of BCH using Blocktivity’s Activity Valuation Index (AVI).

At the time, it looked vulnerable, and the market was a little unsettled just before Bitcoin (BTC) led it downward. According to the AVI, Bitcoin Cash was overvalued by about three to one relative to Bitcoin. Since then, Bitcoin has taken a 47 percent haircut, and the whole market went with it. But along with Bitcoin Cash’s (BCH) hard fork shenanigans, the price went down about 73 percent.

At today’s numbers, the BCH AVI is about 0.88, which means it would be slightly overvalued compared to Bitcoin’s market capitalization and transaction activity. Currently BCH has a market cap of approximately $1.56 billion and a price of $89. A fair valuation according to the AVI would be $78. That’s much better than November’s mismatch, owing to the severe price correction.

Transaction numbers are down from 22,900/day pre-fork to today’s 14,400/day. This is to be expected as many of those November transactions were probably pre-fork positioning.

But, of course, this isn’t the whole picture. To be fair, we should look at the combined BCH and BSV values to get a better comparison to pre-fork BCH.

The combined market cap is $2.96 billion and price is $168. This is very close to the $187 valuation we placed on BCH back in November, but we need a closer look at BSV’s activity numbers to get its current AVI.

This past weekend it was noted that Coinbase may have moved a large quantity of BSV which likely skewed Bitcoin SV’s activity numbers. But at 34,000 transactions/day and a $1.4 billion market cap, BSV has an AVI of 2.3, a much better valuation than BCH.

The AVI for BCH and BSV combined would be 1.6 at today’s numbers. This preliminary look at BSV’s AVI suggests it has better value than BCH, but we’ll have to see how those activity numbers change over the coming days and weeks.