The charts show that Bitcoin is undervalued.

A very friendly-looking Bitcoin (BTC) model called the “Bitcoin Rainbow” chart would have you believe that Bitcoin is undervalued — but what do the fundamentals say?

Blockchain Center’s Bitcoin Rainbow Chart Currently screaming “Buy!” After the price of BTC started to come out of the “essentially fire sale” area where it had been strong for a while.

Still, the website explains that the team “plotted two curves,” one “best fit for all bitcoin highs (red) and one that includes only lows (blue).”

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Bitcoin Rainbow Chart | Courtesy of Blockchain Center

Another popular model of bitcoin — the stock-to-flow model (S2F) — has a more solid foundation than the argument, but the price of BTC has recently far exceeded the value predicted by the model. According to Glassnode’s S2F deviation Model, Bitcoin Currently it is worth only 0.2 according to the model.

Looking at the exponential S2F chart, the model has historically predicted Bitcoin’s price accuracy to a surprising degree.

According to Bitcoin Worldwide’s S2F Chart, the model currently estimates the value of Bitcoin at $109,500. During a December 2022 interview, the pseudonymous creator of the model, PlanB, suggested that Bitcoin could be headed higher and that the stock-to-flow model has not yet been invalidated.

Plan B suggests that the original version of the model is the one he trusts the most, not overly optimistic about later models.

“If we assume that the old model, the original 2019 model is correct, the $55,000 model, then the next half price may go up somewhere – and I’m making a very wide range, some people don’t like that – but somewhere. Somewhere between $100,000 and $1 million.

Plan B.

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). Is. The stock-to-flow ratio estimates the value of Bitcoin and other rare assets.

The chart is based on the idea that the value of an asset is directly proportional to its volatility.

According to the stock-to-flow model, halving events that occur approximately every four years — when the mining rate of new bitcoins is halved — directly affect bitcoin’s price. The current stock-to-flow ratio suggests that Bitcoin is still undervalued and is expected to reach a new all-time high in the future.

While over the past few months, Bitcoin has moved more than ever before from its estimated value to the negative, its value has moved much more to the positive in the past. In fact, the above chart from Glassnode shows that on June 8, 2011, the price of Bitcoin was about 41 times higher than the S2F model estimates.

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Bitcoin’s S2F Divergence Chart. | Thanks to Glassnode

Given other fundamental principles, Glassnode data also shows The percentage of bitcoin supply last active five or more years ago has hit a new all-time high of 27,772% – a sign that BTC continues to accumulate for long-term holding.

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