Charts suggest bitcoin is undervalued

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Charts suggest bitcoin is undervalued

A Very Favorable Looking Bitcoin (BTC) Model Called the “Bitcoin Rainbow” Chart Would You Believe Bitcoin is Seriously Undervalued – But What Do the Fundamentals Say?

Blockchain Center’s bitcoin rainbow chart is currently showing a “Buy!” BTC price basically broke out of the “fire selling” zone where it had been consolidating for some time.

Nevertheless, the website states that the team “fit two curves”, one of which “best fits all of the bitcoin highs (red) and one that includes only the lows (blue).”

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Bitcoin Rainbow Chart | Courtesy of Blockchain Center

Another popular bitcoin model – the stock-to-flow model (S2F) – arguably has more solid grounds, but despite this the price of BTC has recently been far from what the model predicted. According to Glassnode’s S2F deflation model, bitcoin is currently only worth about 0.2 of its modeled value.

Looking at the Exponential S2F chart, the model has historically predicted the price of bitcoin with a surprising degree of accuracy.

According to Buy Bitcoin Worldwide’s S2F chart, the model currently estimates the price of bitcoin at $109,500. During an interview in December 2022, PlanB, the pseudonymous creator of the model, suggested that bitcoin could move higher and that the stock-to-flow model has not yet been invalidated.

PlanB suggested that the original version of the model is the one it trusts the most, not the more optimistic later models.

“If we assume that the older model, the original 2019 model is correct, the $55,000 model, then somewhere from the next halving the prices could go up – and I’m making a very broad range, some people don’t like that – but Somewhere between $100,000 and $1 million.”

alternative plan.

The stock-to-flow (S2F) chart is a metric that compares the current stock of bitcoin (the total amount of bitcoins currently in circulation) to its annual production flow (the number of new bitcoins mined each year). The stock-to-flow ratio estimates the value of bitcoin and other scarce assets.

The chart is based on the idea that an asset’s value is directly proportional to its scarcity.

According to the stock-to-flow model, an event that occurs approximately every four years – when the rate of new bitcoin mining is cut in half – directly affects the price of bitcoin. The current stock-to-flow ratio suggests that bitcoin is still undervalued and is expected to reach new highs in the near future.

While over the past few months, bitcoin has ventured further into the negative than ever before from its predicted value, its price has ventured much further into the positive in the past. In fact, the aforementioned chart from Glassnode shows that on June 8, 2011, the value of bitcoin was approximately 41 times the value predicted by the S2F model.

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S2F deflection chart of bitcoin. , Courtesy of Glassnode

Looking at other fundamentals, Glassnode data also shows that the percentage of the bitcoin supply that was active five or more years ago hit a new all-time high of 27,772% — a sign that BTC accumulation for long-term holdings continues. Is.

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