Bitcoin Trading at 40% Discount According to Energy Indicator

Bitcoin is currently trading around $94,000 but is perceived as undervalued by 40%, with intrinsic value estimated at $130,000 according to the Bitcoin Energy Value model. This model assesses Bitcoin’s worth based on the energy needed to mine it. The recent price uptick, influenced by institutional confidence and technical breakthroughs, raises expectations for Bitcoin’s future growth and potential to reach new highs.

Bitcoin, the world’s biggest cryptocurrency, is currently an intriguing case study in valuation and market perception. Despite trading above the $94,000 mark, analysts believe it’s undervalued—by about 40%. Charles Edwards, founder of Capriole Investments, emphasises this disparity, indicating that intrinsic value could be as high as $130,000, according to his Bitcoin Energy Value model.

This Energy Value model is quite fascinating. It gauges Bitcoin’s intrinsic worth based on the energy expended in mining, tying the cost of energy to the cryptocurrency’s value. Given that Bitcoin mining uses staggering amounts of power to maintain its network and verify transactions, this energy cost effectively serves as a reliable benchmark. At its current level near $94,000, Bitcoin appears to be trading at a striking discount based on this energy-derived valuation.

To unpack the Bitcoin Energy Value model, it calculates the total energy consumed during Bitcoin mining, thereby assessing its true value in joules of electricity used. The underlying principle here is that Bitcoin, which requires significant energy for production, should correlate closely with its long-term market value. Given the analysis by Edwards, Bitcoin’s market price vs energy valuation shows it is undervalued, hinting at possible price jumps.

Now, let’s talk about Bitcoin’s recent market performance. In the last week, it has seen a price bump, recently crossing $94,000 as positive investor sentiment returned. Currently, Bitcoin is trading at $94,266, showing a 2% increase for the day and an impressive 11% gain this week. This surge comes on the heels of important technical milestones—specifically, it has cruised past the 50-day and 200-day Simple Moving Averages (SMA). The 50-day was around $84,500 and 200-day at $88,857, which had previously acted as price barriers.

So, what’s been pushing Bitcoin’s price up? Institutional interest seems to be a major factor. There were massive inflows into Bitcoin-focused investment products, particularly exchange-traded funds (ETFs), with one day witnessing $1.54 billion in net inflows. This surge implies institutional investors are growing more confident, echoing the sentiment that Bitcoin might be trading at a low price point right now.

When we look at the institutional adoption of products like ETFs, it’s clear that they’re reshaping the cryptocurrency landscape. More institutional players entering the fold lend Bitcoin additional credentials as a legitimate asset, potentially propelling its price further.

Also worth mentioning is Bitcoin’s halving event, which affects supply dynamics. Halving, happening roughly every four years, cuts the number of new Bitcoin minted, inevitably limiting supply. This restriction often fuels price growth, and given that the last halving occurred last year, some suggest it’s influencing the recent price surge we’re witnessing.

Now, the big question: Is Bitcoin really still undervalued? Trading above $94,000 might seem high, but according to Edwards’ Energy Value model, it suggests there’s a 40% difference before it hits that intrinsic 130k figure. With Bitcoin continuing to break through resistance levels and draw institutional investments, the outlook for future growth appears robust.

In summary, while Bitcoin’s current price may raise eyebrows, the Bitcoin Energy Value model indicates it’s undervalued. As the cryptocurrency market evolves and institutional interest rises, there could be substantial price movements ahead, with forecasts indicating Bitcoin may chase or even exceed the $130,000 mark soon.