Bitcoin is currently undervalued by 31% compared to its energy-based fair price, which is estimated to be around $167,800.
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Bitcoin is heavily undervalued versus its “fair” price based on miner output.
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The Energy Value metric calculates that BTC should be trading at nearly $170,000 already.
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Bitcoin is further from its energy value now than when it passed $10,000 for the final time in September 2020.
Bitcoin is 31% undervalued compared to its energy-based fair price, suggesting a significant price surge could be on the horizon.
Bitcoin “fair value” demands 45% price surge
Bitcoin miners hold the key to a hyper-bullish BTC price prognosis that calls for BTC/USD to rise nearly 50%. Bitcoin’s “Energy Value” metric, created by Capriole in 2019, argues that Bitcoin’s correct price, or “fair value,” is “a function of energy input, supply growth rate and a constant representing the fiat dollar value of energy.”
While this means that BTC/USD should be zero if miners were to stop participating in the network entirely, current record hashrates show that Bitcoin is anything but worthless.
Data from onchain analytics platform Glassnode puts the current hashrate — the combined processing power dedicated to the network by miners — at 1.031 zettahashes per second (ZH/s), with its latest all-time highs coming on Aug. 4.
“Hash Rates are flying and Bitcoin Energy Value just hit $145K,” Edwards commented, referring to the metric’s simple moving average (SMA). “That puts price at a 31% discount to value.”
Bitcoin’s Energy Value has reached up to $167,800. Network fundamentals now contrast considerably with price, which has dipped by almost 10% since its record peak last month.
“We are trading at a deeper discount to value today at $116K, than when Bitcoin was at $10K in September 2020,” Edwards added.
BTC price vs. mean reversion
As Cointelegraph reported, many market participants believe the current Bitcoin bull run has just months to run. This gives BTC price precious little time to match its Energy Value rating, which would fall if miners were to reduce the amount of energy they employ.
“Consistent energy input represents a balance between supply and demand. Rising market prices incentivize increased energy input via hash power growth and technology improvements which result in greater energy efficiencies,” Capriole explains in an introduction to the metric.
“For this reason, great increases in market price typically result in long-term increases in committed energy and therefore increases in Bitcoin’s Energy Value. However, when speculation causes skyrocketing prices, without a corresponding increase in energy input, price has historically collapsed back to the Energy Value.”
Bitcoin’s Hash Ribbons metric meanwhile continues to reinforce a healthy outlook for both miners and price performance after its latest “buy signal” flashed in late July.
Key Takeaways
- Bitcoin is currently undervalued: Current price is 31% lower than its calculated energy value.
- Potential for price surge: Analysts suggest a possible rise to nearly $170,000.
- Market dynamics are crucial: Miners’ activity directly influences Bitcoin’s fair value.
Conclusion
Bitcoin’s current price reflects a significant undervaluation compared to its energy-based fair value. With miners pushing record hashrates, the potential for a price surge remains high, emphasizing the importance of energy input in determining Bitcoin’s true worth.
