Bitcoin's Miner Output: Is $167K the 'Fair' BTC Price?
Bitcoin's Undervaluation: Energy Value Analysis
According to crypto asset manager Capriole Investments, Bitcoin (BTC) is currently trading below its "fair" price based on the network's energy input. Their analysis suggests a significantly higher valuation for the cryptocurrency.
Key Takeaways:
- Bitcoin appears undervalued when compared to its energy expenditure, as measured by miner output.
- The "Energy Value" metric estimates Bitcoin's price should be near $167,800.
- Bitcoin's current discount compared to its Energy Value is more pronounced than it was in September 2020, before it surpassed $10,000.
Charles Edwards, founder of Capriole Investments, stated in an X post that Bitcoin's "true value" is approximately 45% higher than its current market price of around $116,000.
Bitcoin's 'Energy Value' Explained
Capriole's "Energy Value" metric, developed in 2019, posits that Bitcoin's fair price is determined by:
- Energy input
- Supply growth rate
- The fiat dollar value of energy
The metric implies that a complete cessation of mining activity would theoretically drive Bitcoin's value to zero. However, current record hashrates, indicating strong miner participation, contradict this extreme scenario.
Data from Glassnode shows the current hashrate at 1.031 zettahashes per second (ZH/s), reaching all-time highs on August 4.
Edwards noted that Bitcoin Energy Value recently hit $145,000, which implies that the current price is at a 31% discount to value.
This discount is more significant than when Bitcoin was priced at $10,000 in September 2020.
Market Outlook and Potential Reversion
While some analysts believe the current Bitcoin bull run has limited time remaining, the Energy Value metric suggests potential for further price appreciation if Bitcoin price reverts to its Energy Value rating.
Capriole Investments emphasizes the balance between supply and demand represented by consistent energy input. Increased market prices incentivize higher energy input through hashrate growth and technological advancements, leading to greater energy efficiencies.
According to Capriole, speculation-driven price surges that are not supported by corresponding increases in energy input have historically resulted in price corrections back toward the Energy Value.
Bitcoin's Hash Ribbons metric also supports a positive outlook for miners and price performance, having recently signaled a "buy signal" in late July.