Further downside is expected, but multiple data points suggest Bitcoin is undervalued
Traders are taking a hands-off approach to BTC, but a number of price metrics suggest Bitcoin is undervalued even though further downside is expected.
The outlook across the cryptocurrency ecosystem keeps to dim as the sharp downtrend that became to start with sparked by using the disintegrate of Terra (LUNA, now LUNC) appears to have claimed the Singapore-based totally crypto mission capital company Three Arrows Capital (3AC) as its next victim.
As huge crypto projects and funding corporations start to fall apart on a weekly basis, the possibility of a long, drawn out bear marketplace is a truth buyers are beginning to just accept.
Based on a current Twitter poll performed through marketplace analyst and pseudonymous Twitter user Plan C, 41.6% of respondents indicated that they concept the Bitcoin (BTC) backside will fall among the $17,000 to $20,000 range.
Addresses keeping as a minimum 1 BTC hits a brand new excessive
In the midst of the heightened volatility and speedy fee decline for Bitcoin, many would assume to look traders dumping their holdings and fleeing to the sidelines in a bid to hold their buying power.
While it has certainly been the case that falling charges and liquidations have pushed many buyers out of the market, less expensive Bitcoin has also attracted some consumers who have patiently been expecting the right access point.
Data indicates that the number of Bitcoin addresses that maintain at the least 1BTC has now hit a brand new all-time excessive and it seems that it will boom within the near destiny if sub-$20,000 BTC maintains to draw consumers.
“BTC is cheaper than it appears”
Market tops and bottoms are commonly overreactions to tendencies and retail traders have a tendency to FOMO whilst the price is rising, yet they’re brief to promote while awful information starts offevolved to unfold.
A greater nuanced analysis of the cutting-edge cost of Bitcoin was mentioned through Jurrien Timmer, director of global macro at Fidelity, who published the subsequent chart and questioned if “BTC is inexpensive than it looks?”
“If we consider a simple “P/E” metric for BTC to be the price/network ratio, then that ratio is back to 2017 and 2013 levels, even though BTC, itself, is only back to late 2020 levels. Valuation often is more important than price.”
Timmer added that BTC is currently priced below its fair market value with the Bitcoin dormancy flow indicator, which shows “how technically oversold [it] is.”
“Glassnode’s dormancy flow indicator is now to levels not seen since 2011.”
Taken together, the rise in Bitcoin addresses holding more than 1 BTC combined with the asset’s historically oversold price and undervalued price/network ratio suggests that the downside possibility may not be as bad as many traders think.