Be informed I am not trying to show, that a particular coin is overvalued or undervalued. This comment only purpose is to show how easily this "fair value" ( www.coinfairvalue.com ) can be manipulated and give examples for its flaws.
Since I have seen coming this fair value up a few times already you should know how easily it can be manipulated.
TL;DR: in the cheapest example I need 36,70$ to double a fair value over a week and raise a coins fair value market cap by "only" 2 billion dollars. Try this with a real market cap ;)
Quote from the page itself on how coinfairvalue is calculated:
Causes for an increase in the price of a currency with respect to another currency:
A relative increase in its transactions per day with respect to the other currency (an increasing transactions ratio).
A relative decrease in its velocity (its users willingness to trade it) with respect to other currency (a decreasing velocity ratio).
A relative increase in its basket average value with respect to the other currency (an increasing basket shift ratio).
A relative decrease in its total discounted supply with respect to the other currency.
Three of these values can be seen as "1" for the purpose of this explanation. Because:
Discounted supply is a value you can pre-calculate, and it can not be manipulated.
Velocity in the calculation uses a 1-year moving average (see "Investor warnings" in a specific coins page), therefore manipulation could only be done over the span of a year.
The same applies to the basket, a 1-year moving average is used. Manipulation would take a long time.
For the transactions though this doesn't apply, quote:
Transactions per day is the variable that has been observed to best correlate with the price movements. It order track the user base in a short-term basis, we have decided to just filter the noise of the transactions per day. We are using an EMA, filtering 2-sigma outliers as a smoothing function. The parameters of the EMA are selected per coin, in such a way that the bias is minimized and the noise is reduced to a minimum.
This means the only value you have to manipulate are transactions. It is of course possible transactions are no fake or artificial, but for this comment I will simply calculate how much it would cost to double a fair value market cap.
To proof the fair value closely follows the smoothed transactions count look at DASH in the time from 23rd july to 31 july: smoothed transactions dropped from 24.000 to 16.000 (-33,3%) and fair value followed from 311$ to 204$ (-35%).
Second example is Monero and the launch of a gambling service called Minko around 25th of april to 11th of may: smoothed tx grew from 4000 to 9870 (+246%) and the fair value followed closely again, from 17$ to 41$ (+240%).
Extreme transaction spam is filtered out, explained on the coin fair value site, but reasonable growth or decrease not as seen in my example. So everything we would have to double a fair market cap would be to double the transaction numbers for a week. But how much would it cost?
Monero: currently 6000 smoothed tx, so we would have to do 6000 tx a day for 7 days = 42.000 tx.
A transaction costs currently 0,0027$ or 0,27cents for being included in the next block. Times 42.000tx and we have 111$ investment to double the fair value market cap by ~500.000.000$.
Example DASH: smoothed tx count of 21.500 currently. So the same math, 21.500tx times 7 days times fee per tx: 21.500 * 7 * 0,00000228DASH * 107$ = 36,70$ to raise the fair value market cap by ~2.200.000.000 $
Example BCH: smoothed tx 48.400 currently. Same math: 48.400 * 7 * 0,00000226BCH * 336$ = 257$ to double the fair value market cap by ~15.000.000.000$.
So you see this fair value is EXTREMELY easy to maniputale with partly hilarious outcome. I ask you to proof these calculation by yourself if someone comes up with "THIS ISN'T TRUE!!" or claiming I am a liar or a Monero FUDster. All resources are given on the coinfairvalue itself and I am not talking about a specific coins value.
Fair value also does not differ when it comes down to transactions. Every transaction is a trade. Even if its a mixer for example. So if you do not have a built in mixer your fair value will be lower than the chain with mixing happening. These mixing tx also affect velocity and the basket, but way slower of course.
The fair value just can not be applied to cryptocurrencies, and this is what I have proven here.
Discussion is welcome. Feel free to reference here whenever coinfairvalue comes up again as "the real value" which should be immune to manipulation.
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source https://www.reddit.com/r/btc/comments/cp8un0/i_calculated_how_much_it_would_cost_to_double_the/
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