What is the fair price HIVE with respect to it's blockchain activity?

A while a go, a friend (@holdo) developed a model for looking at the fair value of HIVE given the blockchain activity. This was inspired by the Bitcoin Energy Value which is a metric calculated by looking at the amount of "energy" expended and attaching a long time horizon to extrapolate a fair value to Bitcoin.

With that study, it was obvious that Bitcoin miners along with their marginal cost of mining Bitcoin was largely contributing to the price of Bitcoin, and, it was a mean reverting indicator such that overshoots in price over the fair value as well as undershoots to the price would revert back to the fair value.

I wondered whether this phenomena was consistent across different blockchains and it would be fitting to look at whether the case is true for Steem or HIVE.

Given that the HIVE is a very new asset with price action just over a month, it is necessary to include the STEEM price up until the fork to see the relationship over the lifetime of the now separated chains.

By taking the number of daily posts on HIVE, we can once again plot a fair value chart for HIVE as a sort of "Brain Energy Value" comparable to the Bitcoin Energy Value.

Now, onto the analysis.

The fair value has been trending above the market value since around mid 2018 which suggests that the value that is present on the chain exceeds that of the market price. We would expect this to be mean reverting, meaning that at some point, the price would "catch up" to the fair value given the blockchain metric of value.

Sure enough, as of April, the price now exceeds that fair value calculation.

Some interesting points to note also, are that during bullish trends, a sustained market value over the fair value can be observed, and any cross under the fair value can always be considered a valuable point to buy.

Another thing to consider is that the price tends to be a leading indicator in this instance as higher price tends to attract more users and thus more posts.

Looking closer at more recent data, we can see that the price is currently holding above the fair value. Can we expect to see this dislocation to hold for long?

Since the value of the network can often trend above the fair value for months at a time, there is no reason to expect that we can't have market price leading fair value for the medium time frame. This is a particularly true for networks that are new and have thus far had little opportunity to capture sufficient price discovery.

The important point to note is that over a longer time frame, we always observe mean reverting behaviour so the market price and fair value can intertwine and "pull" towards each other. When the market price falls below the fair value, it is only a matter of time before it exceeds the fair value.

As it stands, I believe HIVE is early in it's adoption curve and so we can expect substantial surplus to it's fair value for the near term and possibly mid term.

For those looking for the data and wanting to play around with it, please download the excel sheet here