Bitcoin Price Estimator: Behind The Scenes

Bitcoin pricing has rebounded of late to again approach the $10,000 mark, which is our estimate for its current fair value based on our Bitcoin price estimator dashboard. In a recent note, we outlined how to use this dashboard to come up with your own estimates for Bitcoin’s fundamental value. In this note, we take a look behind the scenes to explain how we took our Bitcoin price estimator spreadsheet and created a visual dashboard out of it. See this short video for a live look at the process.

How It Works

What’s the point of creating a dashboard? Now our internal team, as well as Trefis users, can collaborate on Bitcoin price forecasts and compare their outputs in an interactive manner. One important question for users is how much this dashboard can be trusted; in back-testing – a method to see how well it could have predicted the past – it was 96% accurate with respect to actual Bitcoin prices, as shown in the charts below.

Now let’s take a look at how we got to this dashboard. In our underlying spreadsheet, we’ve modeled Bitcoin Pricing as a function of two simple drivers: demand and supply. First, the demand side is driven by the number of users, as well as the daily transaction volume. Meanwhile, the supply side – the number of Bitcoins mined – is capped, with about 80% of the capped amount mined, so this is less important from a forecasting standpoint. In terms of the output, we use a regression model, and in the above-linked video you can see our end formula for Bitcoin pricing in our original Excel model.

Making An Interactive Dashboard

To convert this model to a visual dashboard, we uploaded the Excel model to our platform and searched for the charts we need once it was uploaded. After searching for the correct inputs, we selected the number of unique addresses, as well as the daily transaction volume. Now, you have the charts you need – but if the charts don’t look quite right, you can click on the Edit icon in order to change the x- or y-axis to select the relevant periods, and select which inputs are modifiable.

Finally, we included some charts from our back-testing at the bottom and labeled them. Now that we are finished, we clicked “Done customizing your dashboard”, and clicked “Share,” and now we get a link that we can send to friends or colleagues and ask them to chime in.

In summary – you can convert a spreadsheet, no matter how complex, into a visual dashboard in a matter of minutes. Want to download and try this for the Bitcoin spreadsheet, or your own spreadsheet? Click “Try Trefis” at the top of the dashboard, sign up and you’ll be on your way!

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