Jurrien Timmer, Fidelity’s director of global macro, has argued that Bitcoin (BTC) may be “cheaper than it looks”, highlighting evidence on Tuesday that the cryptocurrency may be both undervalued and oversold.
Addressing his 126,000 Twitter followers, Timmer explained that while Bitcoin has fallen back to 2020 levels, its price-to-network ratio has reeled all the way back to 2013 and 2017 levels, which he said may indicate it is undervalued.
Is BTC cheaper 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. /THREAD pic.twitter.com/6XMPrtRUzF
The price-to-network ratio is a crypto-riff on a popular metric used by traditional stock market investors called the price-to-earnings (P/E) ratio, which is used to determine whether a stock is over or undervalued.
A high ratio could suggest an asset is overvalued, whilst a low ratio could signal an undervalued asset.
Timmer highlighted a chart of Bitcoin’s demand curve overlaid with Bitcoin’s non-zero addresses against its marketcap, noting that the “price is now sitting below the network curve.”
The macro analyst also shared a graph making use of Glassnode’s dormancy flow indicator, which he said suggests “how technically oversold Bitcoin is.”
Entity-adjusted Dormancy Flow is a popular metric for judging Bitcoin value by comparing the price to spending behavior.
According to Glassnode, a low dormancy flow value can suggest increased long-term holder conviction — meaning long-term Bitcoin HODLers are buying up from queasy short-term sellers.
Morgan Creek Digital co-founder and Youtuber Anthony
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