The outlook across the crypto ecosystem continues to darken as the sharp downtrend initially sparked by the collapse of Terra (LUNA, now LUNC) appears to have claimed the Singapore-based crypto venture capital firm. Three Arrows Capital (3AC) as his next victim.
As large crypto projects and investment firms begin to crash on a weekly basis, the prospect of a prolonged bear market is a reality that investors are beginning to accept.
Based on a recent Twitter poll done By market analyst and pseudonymous Twitter user Plan C, 41.6% of respondents indicated that they thought the bottom of Bitcoin (BTC) would fall between the range of $17,000 to $20,000.
Total supply of Bitcoin to the benefit of short-term holders. Source: Twitter
Addresses containing at least 1 BTC hit a new high
Amid the increased volatility and rapid decline in the price of Bitcoin, many would expect to see traders dumping their holdings and fleeing to the sidelines in an attempt to maintain their purchasing power.
While it has been true that falling prices and sell-offs have pushed many traders out of the market, low-priced Bitcoin has also attracted some buyers who have been patiently waiting for the right entry point.
Number of Bitcoin addresses with a balance ≥ 1 BTC. Source: Glassnode
Related: Is the bottom in? Raoul Pal, Scaramucci charge, Novogratz and Hayes weigh in
“BTC is cheaper than it seems”
Market highs and lows are often overreactions to developments and retail traders tend to FOMO when the price is rising but are quick to sell when bad news starts to spread.
A more nuanced analysis of Bitcoin’s current value was discussed by Jurrien Timmer, director of global macro at Fidelity, who aware the following chart and asked if “BTC is cheaper than it looks”.
Bitcoin price vs value. Source: Twitter
“If we take a simple “P/E” metric for BTC to be the price/net ratio, then that ratio is back to 2017 and 2013 levels, although BTC itself is only back to late 2020 levels. Valuation is often more important than price.”
Timmer added that BTC is currently priced below its fair market value with the Bitcoin latency flow indicator, which shows “How technically oversold [it] it is.”
Bitcoin latency stream. Source: Twitter
“Glassnode’s idle flow indicator is now at levels not seen since 2011.”
Taken together, the rise in Bitcoin addresses holding more than 1 BTC combined with the asset’s historically oversold price and undervalued price/network ratio suggests that the potential for a downside may not be as bad as many traders think.
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This post More Downside Expected, But Multiple Data Points Suggest Bitcoin Is Undervalued
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