Is Bitcoin Undervalued Now? Industry Expert Decodes The Market State
08 Juillet 2024 - 10:05AM
NEWSBTC
On Saturday, Bitcoin experienced a robust rally, climbing above
$58,250. Despite this upward movement, it was unable to sustain the
momentum and close above the 200-day Exponential Moving Average
(EMA). This led to the formation of a bearish engulfing candlestick
pattern on Sunday, signaling potential downside momentum.
Currently, Bitcoin is trading below $56,000, positioning it at a
critical juncture in terms of technical analysis and market
sentiment. Sina G, the COO and co-founder of 21st Capital, provided
a breakdown of the factors influencing Bitcoin’s price trajectory
today, particularly highlighting recent declines and evaluating its
undervalued state through sophisticated metrics. Starting with a
historical overview, Sina pointed out that Bitcoin had seen a
drastic 26% decline from a March peak of $73,000, settling around
$56,000 in recent weeks. Related Reading: Bitcoin Critic Calls
‘Institutional Demand’ A Myth Following Recent Price Slump This
sharp decrease has been attributed to several macroeconomic and
sector-specific factors. According to him, Bitcoin’s fall from the
$73,000 peak in March to $56,000 aligns with historical bull market
corrections, which often see significant yet temporary
retracements. The influence of Bitcoin ETFs has been pivotal.
Initially, these ETFs contributed significantly to the price surge
from $16,000 to $73,000, as investors engaged heavily in a
buy-the-rumor, buy-the-news strategy. “Up to mid-march ETF flows
were very strong and the market moved up. Since then ETFs slowed
down and bankruptcy outflows took over, causing a weak price action
all the way down to $56K. A notable recent impact on Bitcoin’s
price has been the selling activity of the German government, which
disposed of Bitcoin seized in 2013 from the pirated content
platform Movie2k.to. “The government’s decision to liquidate
approximately 10,000 coins across three transactions coincided
directly with significant price drops on specific dates in June and
July,” he noted. This selloff contributed to a steep 24% crash in
June and July, exacerbated by the large volume of Bitcoin
introduced into the market. Related Reading: Bitcoin Price Crashes
Below $54,000: Top-5 Reasons Is Bitcoin Undervalued? To address
whether Bitcoin is currently undervalued, Sina turned to the
Volatility-Adjusted Price Level Index (VPLI), a proprietary metric
developed by 21st Capital. “Currently, our VPLI is at -3.57, which
indicates that Bitcoin is significantly below its fair price,” Sina
stated. He further clarified that historically, a VPLI score of -10
corresponds with bear market bottoms, placing the current reading
in a context that suggests Bitcoin is potentially undervalued.
“This puts us in the 41th percentile of values – i.e., Bitcoin has
only spent 41% of below this VPLI reading (most of which during the
bear markets). So the risk-reward balance is favorable,” he added.
Looking forward, Sina highlighted two critical short-term
indicators that could dictate Bitcoin’s immediate price movements:
the continuation of Bitcoin sales by the German government and the
behavior of the perpetual swaps funding rate. “Recently, the
funding rate has been negative, which is typically a bearish
signal. This suggests that many traders are taking short positions,
anticipating further declines, which paradoxically might indicate
that the market is close to reaching a bottom,” he concluded. At
press time, BTC traded at $55,835. Featured image created with
DALL·E, chart from TradingView.com
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