Bitcoin has lost half of its value in the last month or so, and that’s causing a lot of consternation in the crypto space.
At first, Bitcoin proponents suggested that Bitcoin would be the perfect safe haven for traders fleeing traditional equity markets.
But then, as the Dow and S&P 500 tanked, we saw Bitcoin sink, too.
Yesterday we were reporting how investors may be moving to stablecoins to strike a balance between crypto and fiat investments.
Today, however, Omkar Godbole suggests that Bitcoin itself might be undervalued.
As a writer for Coindesk, Godbole produces daily Bitcoin analysis that’s highly technical and engaged with the markets.
Today, Godbole uses what’s called a market value to realized value or MVRV to suggest that the coin’s value will likely at some point bounce back.
“Bitcoin’s market value to realized value (MVRV) Z-score fell below zero on Friday and stood at -0.18 as of Monday, according to crypto analytics firm Glassnode,” Godbole writes. “The metric is used to to identify periods where the cryptocurrency is under- or overvalued.”
A provided chart shows howthe MVRV has gone down into negative numbers. If you look, you can see that the MVRV generally stays below the actual BTC value, except for during spikes when it advances past that mark, suggesting to investors that the coin may be overvalued. In general, when BTC is under, say, $11K, the MVRV is lower.
Of course, as we’ve reported numerous times, investors like Tim Draper and Anthony Pompliano suggest Bitcoin will be at enormously high levels like $1 million in two years or so.
However, it’s important to bake in this immediate coronavirus pressure on the markets. Look for clearer numbers as the equities market handles the enormous pressures put on it, while ingesting the Federal Reserve’s additional emergency rate cut in some coherent way.