A general valuation guide

Worldwide, central bank credit, mostly banknotes & bank reserves, as a percentage of GDP have ballooned.The general misunderstanding is that this is due to quantitative easing, but quantitative easing is only the substitution of short term credit for long.It's true that central banks, like the Fed, have done this, but the expansion total reserve credit is due to the level of interest rates.Ironically, this phenomenon called Liquidity Preference Theory was posited by Keynes, an economist who more or less dismissed the value of money & inflation's impact on recession, though he didn't mean for it to explain the relative quantities of money, and it can be seen in historical US data.Almost no cryptocurrency has any interest rates, and none has properly priced or short term interest rates. This would present a problem for valuation if it weren't for the greatest monetary economist of the first half of the twentieth century Irving Fisher.He is the reason why we have a reliable price index, eponymously named the Fisher Ideal Index. Which he constructed after being nearly the sole creator of price index tests.He also developed the theory of the Fisher Effect which states that the nominal interest rate is the sum of the real interest rate and the inflation rate. This also can be observed from history.By combining the Fisher Effect with Liquidity Preference statistics, a basis valuation for any currency, or more importantly cryptocurrency, can be determined.First, a cryptocurrency's inflation rate has to be determined. This can be done by taking the rate of change of the inverted the annualized quotient and subtracting the inflation rate of a population. For example, in bitcoin's case, the inverted annualized quotient is last year's price divided by this year's price, so in USD's case, that is about $580 divided by $288, a 100% increase. The last known inflation rate for the US is about 0%, so bitcoin's inflation rate for the US is 100%.Since nominal interest rates are usually a few percentage points above the inflation rate, bitcoin's implied short term interest rate is approximately 102% or less.There's not much data for interest rates this high, so it can be assumed that bitcoin's maximum liquidity preference is 4% of its' users' GDP.Here is where the uncertainty of a valuation increases since it's not easy to determine what the average income of the users or even the total quantity of users is.Assuming that there are 1.5 million bitcoin users and that the vast majority are in the US and Europe, their GDP could be estimated to be $69 billion. Multiplying by the above liquidity preference rate, bitcoin could be valued at $2.76 billion, not too far from its present market capitalization. via /r/CryptoCurrency http://bit.ly/1Sijnlq