Fundamentals Suggest Bitcoin Massively Undervalued
Bitcoin price action might not reflect it, but the leading cryptocurrency by market cap could be massively undervalued, according to a variety of fundamental metrics that focus on coin issuance.
These tools are widely known, but when combined paint a clear picture that backs up any chance that the top coin by market cap is actually undervalued at $40,000 per BTC.
The largest digital asset by valuation rallied over the week to cross the $40,000 resistance level after staying at the bottom of the pyramid for longer than expected.
China government crackdown impacted investors sentiment in a greater measure in the first half of 2021, resulting in selling rallied as crypto holders booked profit.
Speculative Boom and Bust Cycles And The Impact On Perception Of Value
Any asset – be it stock, currency, commodity, or otherwise – goes through boom and bust cycles; bull and bear markets. These cycles are more rapid and take place more frequently in crypto than they do in traditional market counterparts.
The reason is both due to the always-on 24/7, global crypto market and the speculative nature of Bitcoin, Ethereum, and other top coins. Even with adoption taking place, they’re still far from achieving their potential.
When speculative assets reach a peak of a bull cycle, they are typically far more overvalued than they should be, which causes such an extreme correction back down toward the “mean.” During bear cycles, speculative assets tend to overcorrect as things appear worse off than they actually are.
Bu this is Bitcoin, and the leading cryptocurrency by market cap might be undervalued even though it recently made a bull market “peak.”
Bitcoin might have collapsed by 50% along with the rest of the crypto market, but it could be significantly undervalued currently due to the overcorrection.
Bitcoin corrected and it was characteristically extreme, but due to the ongoing lack of supply the cryptocurrency is significantly below the normal trajectory through the stock-to-flow model “bands”.
In addition, the Puell Multiple is bouncing from lows, and during this cycle has yet to enter the red zone which is standard of any Bitcoin bull market “top.” The Puell Multiple is calculated “by dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of daily issuance value.”
The S2F model is more complex, but both look at how issuance impacts overall supply and the price per BTC.
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Combined, the two fundamental tools suggest that the bull market isn’t finished, and is entering its final stages. The last leg up in Bitcoin as past cycles have proven, will be dramatic and entirely driven by FOMO and a distinct lack of supply.
Crypto sector sees outflows for 4th week
Cryptocurrency investment products and funds posted outflows for a fourth consecutive week, the bulk of which came from bitcoin products, which also experienced its fourth straight weekly outflow, data from digital asset manager CoinShares showed on Monday.
Crypto outflows hit $19.5 million in the week ended July 30, with bitcoin reaching $19.7 million in outflows. Other crypto and digital investment products such as Ripple and Polka Dot, however, did show minor inflows for the week.
Bitcoin outflows occurred despite a recent recovery in price, “suggesting investors were using recent strength to take profits,” said James Butterfill, investment strategist at CoinShares.
The outflows, prompted by negative price action in mid-May, have totalled $295 million, representing 1% of total assets under management, the report said. Still, bitcoin inflows so far this year remain at a robust $4.1 billion.
Bitcoin rallied about 12.5% last week, hitting a high of just under $43,000. It was last down 0.5% at $39,654 BTCUSD .
Blockchain data provider Glassnode, in its latest note on Monday, provided a not-so-upbeat outlook on bitcoin. It said it had seen last week a notable spike in younger coins, or those less than one week old, being sold in what “resembles a capitulation bottom.”
Glassnode also noted that bitcoin supply at exchanges has fallen, with an “extremely large volume of coins” flowing out of exchanges, comparable to the peak outflows seen in November 2020.
Ether, the token used in the Ethereum blockchain, also saw outflows of nearly $10 million last week, its second straight week of outflows, data showed. Year-to-date inflows into ether products still showed a healthy $957 million.
A major technical upgrade looms on the Ethereum blockchain this week that could sharply lift its price. On Monday, ether was last up 3% at $2,633 ETH=BTSP.
Grayscale is still the largest crypto asset manager, with $34.2 billion in assets under management, up from $28.5 billion in the previous week.
Assets under the management of CoinShares, the second-biggest digital asset manager, were at $3.7 billion in the latest week, up slightly from $3.2 billion previously.
Fundamentals Suggest Bitcoin Massively Undervalued
