CoinDesk reports:
Bitcoin analyst Willy Woo has raised doubts about the relevance of Metcalfe value in assessing Bitcoin’s growth.
In response to a post by Alex, financial asset manager at SFO, Woo explained why relying on Metcalfe Value to track Bitcoin’s growth could be misleading.
Alex’s initial post indicated that Bitcoin’s Metcalfe value currently stands at around $28,000, mirroring levels seen in May 2021. This similarity suggests a lack of progress in Bitcoin’s network utility over the past three years.
Woo countered this view, arguing that the Metcalfe value metric suffers from two flaws: “A broken paper, and a broken methodology for measuring the broken paper.”
Woo elaborated that Metcalfe’s value assumes exponential growth with each new user joining the network. While this paper holds true in models like communication networks, Bitcoin functions as a value storage network where the value brought in by new entrants varies significantly and unevenly distributed.
Highlighting the disparity between users joining with $1 versus $1 billion, Woo emphasized that current Metcalfe BTC models use simple on-chain address counts as proxies for individual entities.
Woo further stressed that such models fail to accurately account for scenarios such as high-definition addresses or individuals using multiple wallets. He concluded that until the metric can legally cluster addresses to determine actual user counts joining the network, it captures only a fraction of Bitcoin users, as many holders remain offline.