Mathematics law promises growth for the ETH! Metcalfe’s Law has joined the list of various indicators signaling the recent undervaluation of the Ethereum exchange rate.
ETH and BTC correlation begins to weaken
Ethereum (ETH) and bitcoin (BTC) as the world’s two major cryptocurrencies are constantly in the spotlight in the cryptocommunity. However, bitcoin has been tugging at the blanket lately, relentlessly updating historical highs.
Meanwhile, bitcoin’s strengthening above the $40,000 mark has not pleased most altcoins, whose value paired with BTC has sagged noticeably. However, it is possible that as bitcoin begins to drop, Ethereum will come to the forefront and launch a new rally.
At least the voices of the likes of ETH-enthusiasts, who believe the currency to be undervalued, have recently intensified. They cite various characteristics and indicators to support their predictions. Also this week it became known that the volume of transactions on the Ethereum blockchain since the beginning of January grew by about 50% and exceeded the volume of transactions in the bitcoin network in dollar terms.
Metcalfe’s law promises growth for ETH
A recent article published by macroeconomist-statistician D. Taylor also reinforces the bullish view of Ethereum. He chose one Mathematics law promises growth for the ETH and it’s – Metcalfe’s law as the main argument to justify his position. As a result, he came to the conclusion that the price can exceed the $20,000 mark.
The main point of Metcalfe’s law is that the utility of a network is proportional to the number of users of this network. This utility can be represented as a quadratic function, according to which the estimated value of the network is proportional to the square of the nodes used (Utility = n2).
Accordingly, applying mathematical principles to the Ethereum network demonstrates how the size of the user base affects the growth rate of any network. In the illustration below, you can see that adding new nodes (in this case, telephone nodes) causes the number of new independent connections to grow exponentially.
So, two telephones can create only one connection, five telephones can create ten connections. Meanwhile, 12 phones create 66 unique connections.
This model has already proved its validity when applied to the bitcoin network and Facebook. It means that the intrinsic value of the network can be created by increasing the number of its users. All this promises an aggressive growth of the Ethereum exchange rate.
Recall that the day before the currency was finally able to update its historical high. In addition, judging from the previous bull cycle of 2017, a significant rally of ETH was preceded by the growth and subsequent consolidation of bitcoin.