A new Bitcoin-based valuation framework from prominent analyst and crypto O.G. filbfilb suggests ZEC already trades above levels justified by current network activity.
ZEC’s most recent surge, which got it close to $1,300, has managed to revive considerable comparisons between it and Bitcoin – in particular because both of them have a maximum supply of 21 million coins.
However, prominent analyst filbfilb argues that matching circulating supply alone says very little about valuation. He has developed a series of models that attempt to better quantify how much of Bitcoin’s network value Zcash has actually managed to earn.
The analyst compared ZEC with Bitcoin using metrics such as transaction activity, transferred value, circulating supply, as well as potential future convergence between both networks.
Current Activity Suggests Bullish Biases May Be Overblown
Zcash currently has slightly less than 17 million coins in circulation, which approximately matches an earlier stage in Bitcoin’s issuance history.
But instead of simply applying Bitcoin’s valuation at that particular point to ZEC, filbfilb adjusted it based on relative network usage.
At the equivalent issuance stage, Zcash’s TX activity amounts to roughly 3.71% of Bitcoin’s. When that percentage is applied to Bitcoin’s historical market capitalization, the result produces an implied ZEC price of approximately $254.
A second model compares both networks today. At the moment, Zcash processes roughly 1.01% of Bitcoin’s transaction count, which, when applied to BTC’s current market cap, results in an implied value near $944 per ZEC.
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As you can notice, both of these numbers sit below the recent high that ZEC made.
ZEC’s Privacy Changes the Calculation
Filb notes an obvious weakness when applying the transaction count model: a $10 transfer and a $10 million transfer each count as a single transaction. The model, therefore, also considers the dollar value transferred across each network.
Zcash complicates that calculation. That’s because shielded transactions hide transfer amounts. He assumes that 58% of transactions are shielded and that the average shielded transaction carries the same dollar value as an observable one.
Under those assumed conditions, Zcash reaches approximately 12.34% of Bitcoin’s equivalent-stage transfer value, compared with only 3.71% using the previous model.
Blending those two measurements equally results in an estimated network progress of about 8.03%.
Convergence is Important
This is where the numbers become substantially larger.
If Bitcoin’s current network valuation is treated as a potential long-term destination, the transaction-only model results in a price of roughly $3,457 per ZEC under a hypothetical 100% Bitcoin value-capture scenario.
Once he blends the transaction and privacy-adjusted transfer model, it reaches roughly $7,480, while 25% and 50% capture assumptions assume $1,870 and $3,740, respectively.
It’s also important to note that these are but scenarios. They are not price targets or probabilities. He has also highlighted certain limitations, including differences between architectures, as well as the inability to measure shielded transfer values.
The takeaway is that ZEC, at current highs, already appears relatively expensive when compared to what its network has achieved today. Whether that valuation ultimately changes depends on whether the cryptocurrency can continue closing the gap with Bitcoin.