New Bitcoin Yardstick Calculation Says $20K BTC Now ‘Extraordinarily Cheap’
A simple but elegant Bitcoin (BTC) price gauge has returned to pre-2017 bull market lows.
As noted by its creator, Charles Edwards, CEO of asset manager Capriole, the Bitcoin Yardstick is now at its second lowest level in history.
Yardstick prints the second lowest reading ever
As on-chain calculations converge to insert a classic macro bottom for BTC/USD, a new candidate suggests that Bitcoin is even more oversold than the average hodler thinks.
Bitcoin Yardstick measures the relationship between Bitcoin market cap and hash rate – two fundamental metrics that, when compared to each other, provide important price insight.
As Edwards explains, the lower the value, the “cheaper” Bitcoin is – more hash rate is used to secure low-cost coins.
Although he cautions that it is “not investment advice”, this has implications for potential buyers – much of the unrealized value lies in the amount of work that has been done to secure the Bitcoin supply during price suppression.
Currently, the hash rate of the Bitcoin network is near all-time highs, while the price is down around 75% from the last all-time highs seen in November 2021.
“Today we see the second lowest reading for the Bitcoin Yardstick in the entire history of Bitcoin,” commented Edwards:
“This means that on a relative basis, Bitcoin is extraordinarily cheap given the amount of energy used on what is the most powerful computer network in the world.”
Bitcoin hash rate continues
Yardstick incorporates the concept of proof-of-work (PoW), the mining algorithm of the Bitcoin network, and its ability to store and increase value over time based on productive activity. The Bitcoin Standardthe seminal book by academic Saifedean Ammous, focuses heavily on the idea.
Related: Bitcoin ‘double bottom’ excites bulls as NVT signal predicts big moves
The opposite of today’s scenario, where the price is high compared to the work done, happened during the 2013 and 2017 bull market years.
In 2021, several peaks followed Bitcoin’s double peak in April and November respectively, but none matched the magnitude of the previous peaks.
As Cointelegraph reported, Bitcoin miners are under significant stress despite increasing hash rate as profit margins are squeezed.
The summer already saw a period of miners’ “capitulation”, with Edwards laying out evidence of recovery underway in August.
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