Bitcoin’s fair value is $35,000 — but who’s counting?

Bitcoin’s BTCUSD surge to an all-time high may not say anything about bitcoin’s reality. In fact, it may be nothing more than random fluctuations above and below the cryptocurrency’s fair value.

I base this on a valuation model that, following Metcalfe’s Law, relates bitcoin’s price to the square of the number of users. The chart below — courtesy of data from Claude Erb, a former commodities portfolio manager at TCW Group — plots bitcoin’s actual price over the past decade along with Erb’s application of Metcalfe’s Law.

Erb in an email reminds us...