Fidelity Expert: Bitcoin is cheaper than you think!

The Bitcoin price stopped falling freely, returning from the last cycle ‘record high and rising above $ 22,000 on June 16, 2022. Have we finally hit rock bottom?

The Bitcoin price fell 26% this week to reach a new 18-month low of $ 20,193 on June 15, 2022. Since then, however, the BTC price has been able to recover somewhat. At the time of writing, however, the bitcoin price is still 67% off the latest record high of $ 22,344.

Jurrien Timmer, director of global macro at investment giant Fidelity, examined the price-to-earnings (P / E) ratio for Bitcoin. Since Bitcoin is a cryptocurrency and not a business, Trimmer used a price / network ratio.

According to the chart shared on Twitter by Jurrien Timmer, the ratio is at the same level as it was in 2013 and 2017, when the BTC price hit the highs in these cycles. The Bitcoin price, on the other hand, is at the same level as it was at the end of 2020. Timmer pointed out that “valuation is often more important than price”.

Bitcoin: where’s the bottom?

Price-earnings ratio (also P / E ratio) is used in the classic financial markets to estimate the value of a company. With the classic P / E ratio, the current share price is weighted by earnings per share. This does not work with cryptocurrencies, which is why the course is related to networking activity. Alternatively, the “Network Value to Transaction Ratio (NVT)” could also be considered, as analyst Willy Woo already did.

Timmer, on the other hand, compared the number of non-empty Bitcoin addresses with the BTC price. “The price is currently below this network curve,” Timmer wrote. He then used Glassnode’s Bitcoin hibernation flow model to show how oversold the asset is currently. Bitcoin is as oversold according to the model as it was in the market capitulations of 2011, 2014 and 2018.

Diagram — Glassnode / Fidelity

This may be an indication that we are near the bottom of this market cycle, and this week’s divestiture may have been the last wave of divestitures.

Miners sell large quantities of BTC

However, there is another factor that could lead to a possible price drop similar to the market crash in 2018: Bitcoin miners.

Bitcoin miners moved large amounts of BTC to crypto exchanges this week. CoinMetrics reports that on June 15, 2022, the value of BTC (88,000!), sent by miners on crypto exchanges, reached a new record ever (calculated in USD) of $ 1.94 billion.

Castle Island Ventures partner Nic Carter explained the background in a recent tweet.

Miners must sell their assets to cover rising energy costs and be prepared for a crypto winter. The sale of the miners could lead to another strong divestment. In the last few cycles, the BTC price has fallen by over 80% after reaching the corresponding peaks. So history could repeat itself.

If that happens, the Bitcoin price could drop to around $ 12,000 (about -82% from last record high) pretty quickly, as explained by expert Peter Brandt.


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