Further downside is expected, but multiple data points suggest Bitcoin is undervalued

The outlook throughout the cryptocurrency ecosystem proceed to dim because the sharp downtrend that was initially sparked by the collapse of Terra now seems to have claimed the Singapore-based crypto enterprise capital agency Three Arrows Capital (3AC) as its subsequent sufferer. 

As massive crypto tasks and funding corporations start to break down on a weekly foundation, the prospect of a protracted, drawn out bear market is a actuality traders are starting to simply accept. 

Based mostly on a latest Twitter poll performed by market analyst and pseudonymous Twitter person Plan C,  41.6% of respondents indicated that they thought the Bitcoin (BTC) backside will fall between the $17,000 to $20,000 vary.

Whole Bitcoin provide in revenue held by short-term holders. Supply: Twitter

Addresses holding at the least 1 BTC hits a brand new excessive

Within the midst of the heightened volatility and speedy worth decline for Bitcoin, many would count on to see merchants dumping their holdings and fleeing to the sidelines in a bid to keep up their buying energy.

Whereas it has certainly been the case that falling costs and liquidations have pushed many merchants out of the market, low-priced Bitcoin has additionally attracted some patrons who’ve patiently been ready for the correct entry level.

Variety of Bitcoin addresses holding a steadiness ≥ 1 BTC. Supply: Glassnode

Knowledge exhibits that the variety of Bitcoin addresses that maintain at the least 1BTC has now hit a brand new all-time excessive and it seems that it’s going to enhance within the close to future if sub-$20,000 BTC continues to draw patrons.

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“BTC is cheaper than it appears to be like”

Market tops and bottoms are often overreactions to developments and retail merchants tend to FOMO when the value is rising, but they’re fast to promote when dangerous information begins to unfold.

A extra nuanced evaluation of the present worth of Bitcoin was mentioned by Jurrien Timmer, director of world macro at Constancy, who posted the next chart and questioned if “BTC is cheaper than it appears to be like?”

Bitcoin worth vs. worth. Supply: Twitter

Timmer stated,

“If we think about a easy “P/E” metric for BTC to be the value/community ratio, then that ratio is again to 2017 and 2013 ranges, despite the fact that BTC itself is barely again to late 2020 ranges. Valuation typically is extra necessary than worth.”

Timmer added that BTC is at present priced beneath its truthful market worth with the Bitcoin dormancy stream indicator, which shows “how technically oversold [it] is.”

Bitcoin dormancy stream. Supply: Twitter

Timmer stated,

“Glassnode’s dormancy stream indicator is now to ranges not seen since 2011.”

Taken collectively, the rise in Bitcoin addresses holding greater than 1 BTC mixed with the asset’s traditionally oversold worth and undervalued worth/community ratio means that the draw back chance is probably not as dangerous as many merchants assume.

The views and opinions expressed listed here are solely these of the writer and don’t essentially replicate the views of Cointelegraph.com. Each funding and buying and selling transfer entails threat, you need to conduct your individual analysis when making a call.