Google, Internet Stocks, and Ethereum
Editor's Note: This article comes fromUnitimes（ID：Uni-times）Editor's Note: This article comes from
, by Anthony Bertolino, published with permission.
After the dust of the dot-com bubble settled, we witnessed those unique Internet companies rise from the ashes and bring huge value to users. This not only allowed them to attract hundreds of millions of users, but also translated into a significant increase in the related stock price.
History tends to repeat itself, and we can look back at the past of the Internet to see what the future of crypto assets will look like. While the history of cryptoasset usage is only a few years old, the field has produced some valuable indicators that can help us predict the future.
Spoiler alert: the future of crypto assets may well resemble the history of the internet.
Before discussing these metrics, let's briefly review the growth history of the Internet and Internet-based stocks.
— Thomas Lee, Fundstrat
The chart below shows Gmail's new user growth trend from 2006-2018.
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Data source: www.rocketblocks.me
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Data source: Yahoo Finance
Data source: Yahoo Finance
Let's look at another example to get more data. Instead of focusing on just one or two companies, let's look at the growth of Internet users over the past 20 years (see chart below).
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Internet user growth trend. Data source: DART Consulting
The graph above shows that internet users have grown from about 40 million in 2006 to almost 400 million in 2016. Over the past 20 years, users have grown nearly 10-fold.
Let's compare the growth of Internet users to the growth trend of the First Trust Dow Jones Internet Index Fund (FDN). The graph below shows the huge growth of FDN over the same time period.
Probably most people would say, "Just because we're seeing Internet user numbers clearly reflect rising Internet stock prices, doesn't mean the same is happening in crypto." And that might indeed be the case.
But what if I told you that this is already happening?
In October 2015, the Ethereum network was processing only 6,000 transactions per day, but by October 2019, the Ethereum network was processing more than 700,000 transactions per day. In just four years, the daily transaction volume of the Ethereum network has increased by 100 times.
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Source: EtherScan.io
The following chart is the historical price trend of ETH, which is almost the same as the above Ethereum network daily transaction volume trend chart, but with one difference.
The figure below shows the growth trend of the number of active addresses in the Ethereum network. This shows a steady increase in the number of active accounts/users on the Ethereum network.
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The chart below shows the growth trend of ETH market capitalization (that is, the price of ETH multiplied by the total amount of ETH in circulation). It can be seen that there is almost no difference between the growth trend of the figure below and the growth trend of the number of active addresses in the figure above (although the measurement is a completely different object).
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Source: BitInfoCharts
The last graph compares the growth trend of ETH price (blue line) and the number of addresses added to the Ethereum network (red line).
As you can see, the price of ETH in the graph above almost always corresponds directly to the number of addresses added. For innovative investors, current market conditions and information asymmetries temporarily keep ETH trading well below its fundamental value.
Over the past four years, Ethereum has experienced explosive development, not only from a speculative standpoint, but more so in terms of valuable real-world use cases. Not only will this trend continue, but it will produce the compounding effect shown by Metcalfe's Law (ie, the greater the number of users on a network, the greater the value of the entire network and each computer within that network).
