Key points:
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Bitcoin is heavily undervalued vs its “fair” price based on miner output.
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The Energy Value metric calculates that BTC should be trading at almost $170,000.
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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 (BTC) should trade at as much as $167,800 per coin if price matched its “energy value,” said the founder of crypto asset manager Capriole Investments.
In an X post Thursday, Charles Edwards calculated that Bitcoin’s true value is about 45% higher than its current $116,000.
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 almost 50%.
Bitcoin’s “Energy Value” metric, created by Capriole in 2019, argued 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 put 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 said, referring to the metric’s simple moving average (SMA).
“That puts price at a 31% discount to value.”
Bitcoin’s Energy Value has reached as much as $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 have said the current Bitcoin bull run has just months to go.
Related: Bitcoin supply shock to ‘uncork’ BTC price as OTC desks run dry
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 said 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 continues to reinforce a healthy outlook for both miners and price performance after its latest “buy signal” flashed in late July.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
