Understanding Crypto · Lesson 8 · Beginner
Network Value: the Unit Price Lies
You compare assets by network value instead of unit price and avoid the cheap-because-lower-price fallacy.
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Price Times Quantity
Network value equals price per coin times circulating coins. It is the anchor for all valuation ratios, the counterpart to a stock's market capitalization.
The unit price alone lies: at the same network value but four times as many coins, one coin is worth only a quarter. DENT with 100 billion tokens has a low unit price and is still not cheap.
Coin A cheap per unit, many coins. Coin B expensive, few coins.
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Test yourself
Coin X costs 0.50 USD, Coin Y costs 60,000 USD. Which is cheaper?
- You cannot tell from the unit price
- Coin X, because it is cheaper per unit
Coin A and Coin B have the same network value, Coin A has four times as many coins. How do the unit prices compare?
- Coin A costs a quarter of Coin B per unit
- Same unit price
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The key points at a glance
- Network value is price per coin times circulating coins, the crypto counterpart to market capitalization.
- A low unit price does not mean cheap.
- Network value alone says nothing about over- or undervaluation.
Deep dive
Why a coin at 0.50 USD is not cheap
The most common beginner mistake is looking at the unit price. A coin at 0.50 USD looks cheap next to BTC at 60000 USD, but that tells you nothing until you know the circulating supply. The relevant figure is network value: price per coin times circulating coins.
- litecoin converges toward roughly 84 million, bitcoin toward 21 million.
- At the same network value one litecoin would be worth only a quarter of one bitcoin.
- DENT has roughly 100 billion units and still a high network value.
- 'Cheap per unit' and 'cheaply valued' are two different statements.
The formula against the unit-price fallacy
At the same network value, circulating supply alone determines the unit price. A low price per coin is the logical result of large supply, not a discount.
That is exactly what the marketing targets: '0.001 USD' sparks the fantasy 'what if this hits 1 USD one day'. Do the math against it. 1 USD at 100 billion coins would be a network value of 100 billion USD, a scale reached by only a handful of assets worldwide.
What network value does NOT tell you
Network value is the anchor for any comparison, but not a valuation verdict. It tells you how large a network is, not whether it is expensive. For over- or undervalued you need the relation to on-chain activity, such as NVT.
- Always compare 'cheap' or 'expensive' via network value, never via unit price.
- Small network values are prone to pumps and manipulation.
- bitcoin was in the low tens of billions during Burniske's era.
- Today it is in the trillions, with increased correlation to the Nasdaq and interest rates.
Sources: Burniske/Tatar, Goodman
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