Bitcoin’s price action may not reflect it, but the leading cryptocurrency by market cap may be vastly undervalued, according to a number of fundamental metrics focusing on coin issuance.
These tools are well-known, but when combined, they paint a clear picture that supports any possibility that the top coin by market cap is undervalued at $40,000 per BTC.
The Impact of Speculative Boom and Bust Cycles on Value Perception
Any asset – stock, currency, commodity, or otherwise – experiences boom and bust cycles; bull and bear markets. These cycles are faster and occur more frequently in crypto than in traditional market counterparts.
The reason for this is due to the global crypto market’s constant activity as well as the speculative nature of Bitcoin, Ethereum, and other top coins. Even with adoption, they are still far from reaching their full potential.
When speculative assets reach the peak of a bull cycle, they are typically far overvalued, resulting in such an extreme correction back down toward the “mean.” Speculative assets tend to overcorrect during bear cycles, making things appear worse than they are.
But this is Bitcoin, and even though it recently reached a bull market “peak,” the leading cryptocurrency by market cap may be undervalued.
According to the S2F Model, Bitcoin is undervalued, according to the Puell Multiple.
Bitcoin, like the rest of the crypto market, may have dropped by half, but it may now be significantly undervalued as a result of the overcorrection.
Bitcoin corrected, and it was characteristically extreme, but the cryptocurrency is still significantly below the normal trajectory through the stock-to-flow model “bands” due to the ongoing lack of supply.
Furthermore, the Puell Multiple is bouncing off lows and has yet to enter the red zone, which is typical of any Bitcoin bull market “top” during this cycle. The Puell Multiple is determined by “dividing the daily issuance value of bitcoins (in USD) by the 365-day moving average of daily issuance value.”
The S2F model is more complex, but both consider how issuance affects total supply and the price per BTC. When the two fundamental tools are combined, they indicate that the bull market isn’t over and is nearing the end. As previous cycles have demonstrated, the final leg up in Bitcoin will be dramatic and entirely driven by FOMO and a distinct lack of supply.