Jurrien Timmer (Fidelity’s global macro director) has suggested that Bitcoin (BTC), may be cheaper than it appears, highlighting evidence that Tuesday shows that the cryptocurrency could be undervalued or oversold.
Timmer addressed his 126,000 followers on Twitter and explained that although Bitcoin has fallen back below 2020 levels, its price to network ratio has risen all the way back up to 2013 and 2017, which may indicate that it is undervalued.
Is BTC more expensive than it appears? A simple “P/E” measure for BTC is the price/network ratio. This ratio is back at 2017 and 2013, even though BTC is still in late 2020. Valuation is often more important than price. /THREAD pic.twitter.com/6XMPrtRUzF
— Jurrien Timmer (@TimmerFidelity) June 15, 2022
The crypto-riff on the popular stock market metric price-to network ratio (P/E ratio) is price-to network. This ratio is used to determine if a stock has been over- or undervalued.
A high ratio can indicate an asset that is undervalued. Conversely, a low ratio can signal an asset that is undervalued.
Timmer presented a chart showing Bitcoin’s demand curve overlayed with Bitcoin’s nonzero addresses against its marketcap. He noted that the “price” is now below the network curve.
A graph using Glassnode’s dormancy indicator was also shared by the macro analyst. This indicated that “how technically oversold Bitcoin”
The popular way to judge Bitcoin value is by using Entity-adjusted Flow. This compares the price to spending behaviour.
Glassnode says that a low dormancy value can indicate increased conviction in long-term holders — which means long-term Bitcoin HODLers may be buying up from unscrupulous short-term sellers.
“Glassnode’s dormancy indicator has reached levels not seen since 2011”
Anthony Pompliano, co-founder of Morgan Creek Digital and Youtuber, shared a similar viewpoint to Fox Business Monday. He explained that Bitcoin’s value and price were diverging and that weak hands are selling to stronger hands.
“What we are watching is the transition from weak, short-term-oriented people with weak hands to the long-term-oriented strong hands.”
Bitcoin’s Fear and Greed Index dropped to 7 on Wednesday. This indicates “Extreme Fear”, and is at its lowest level since Q3 2019. Low index numbers in the past have indicated a buying opportunity.
Related: Bitcoin price rises to $22.5K following Fed 75 basis points hike to curb runaway inflation
Fidelity Investments’ analyst Timmer has been bullish about Bitcoin. The investment giant is working to launch a Bitcoin retirement plan that would allow 401(k), retirement savings account holders to directly invest in Bitcoin. Timmer believes that Bitcoin will soon be a popular investment.
Fox Business invited me to discuss bitcoin and the macro-environment. The price and value are not the same thing. Strong hands sell to weak hands. We’ve been there before. Thank you @LizClaman, for having me. pic.twitter.com/1S6TckUguE
— Pomp (@APompliano) June 13, 2022
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