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Bitcoin’s scarcity model hints at massive undervaluation

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The global crypto market cap is $1.34 trillion with a 24-hour volume of $42.56 billion. The price of Bitcoin is $35,320.17 and BTC market dominance is 51.6%. The price of Ethereum is $1,894.49 and ETH market dominance is 17.0%. The best performing cryptoasset sector is Yield Farming, which gained 12%.
Bitcoin’s Stock-to-Flow model indicates undervaluation, as the model predicts BTC’s current price at around $100,000.
Bitcoin’s Stock-to-Flow (S/F) Ratio, a model built on the premise that scarcity fuels value, appears to be regaining its predictive force.
Historically, Bitcoin’s price has moved in tandem with the S/F ratio, making it a potentially useful tool for predicting future valuations.
However, the model deviated from predictions around April 2021, during the bull market run. Interestingly, with the halving five months away, Bitcoin’s trajectory seems to have realigned with the S/F ratio. Although still $65,000 short of the model’s prediction, the trend indicates a positive direction.
The S/F deflection, measuring the divergence between the current Bitcoin price and the S/F model, suggests Bitcoin is still significantly undervalued. This is based on the model’s assumption that a deflection greater than or equal to 1 indicates Bitcoin is overvalued and vice versa. Notably, the only time Bitcoin was deemed more undervalued according to this model was during the FTX collapse in 2022.
James fervently appreciates data, technology, and trend-spotting. As a tech and liberty maximalist, he hails Bitcoin as the 21st century’s paramount invention.
Exploring the phenomena of inversion and un-inversion of the yield curve.
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