Fidelity global macro director Jurrien Timmer has argued that Bitcoin (BTC) may be “cheaper than it looks”. He presented evidence that the largest cryptocurrency was both too low and oversold.
Addressing his 126,000 Twitter followers, Timmer said that while Bitcoin regressed to 2020 levels, the price network ratio declined to 2013 and 2017 levels, which may indicate undervaluation.
Is BTC cheaper than it looks? If we consider a simple “P/E” metric for BTC to be the price/network ratio, then that ratio is back to 2017 and 2013 levels, even though BTC itself is only back to late 2020 levels. Valuation often is more important than price. /THREAD pic.twitter.com/6XMPrtRUzF
— Jurrien Timmer (@TimmerFidelity) June 15, 2022
Bitcoin undervalued condition
The price net ratio is based on the popular model used by traditional stock market traders called the price/earnings (P/E) ratio, which is used to determine whether a stock is overvalued or undervalued.
A high ratio may indicate that the asset is overvalued, while a low ratio indicates undervalued.
Timmer shared a graph of the Bitcoin demand curve superimposed by market cap with non-hollow Bitcoin addresses, noting that “the price is currently sitting below the network curve.”
The macro market analyst shared another chart using Glassnode’s streaming indicator, which shows “how technically Bitcoin is oversold.”
He drew attention to the popular data used to evaluate the price of Bitcoin, which compares the price with the spending behavior called “Entity-adjusted Dormancy Flow”.
According to Glassnode, the indicator reveals the predicament that long-term investors are in. It seems that long-term Bitcoin investors buy from short-term sellers.
Glassnode’s dormancy flow indicator has reached levels not seen since 2011.
Morgan Creek Digital co-founder and Youtuber Anthony Pompliano shared a similar view to Fox Business on Monday, explaining that Bitcoin’s “value and price diverged” and that “weak hands are selling to strong hands”.
What we are facing now is a shift from weak hands that focus on the short term to strong hands that focus on the long term.
The Bitcoin Fear and Greed Index dropped to 7 on Wednesday, dropping to the bottom of the “extreme fear” level. This is the lowest value seen since the third quarter of 2019. Looking at the historical data, it seems that this lower index generally works as a buying opportunity.
Fidelity Investments analyst Timmer remains optimistic about Bitcoin. The investment giant has pushed the button to launch a Bitcoin retirement investment plan that will allow 401(k) retirement savings account holders to invest directly in Bitcoin. Timmer predicts that Bitcoin may see a resurgence soon.
I joined Fox Business to discuss bitcoin and the macro environment.
Value and price are diverging. Weak hands are selling to strong hands. We have been here before.
Thanks @LizClaman for having me. pic.twitter.com/1S6TckUguE
— Pomp 🌪 (@APompliano) June 13, 2022