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The Bitcoin energy value metric says that the "fair" price of Bitcoin reaches $167,000.
"The energy-based fair value" of Bitcoin is $167,000, which is 45% higher than its current price, while standard hash rate data shows that Bitcoin is trading at a deep discount of 31%.
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Key points:
The value of Bitcoin is significantly low compared to its "fair" price based on miner output.
The energy value calculates that the trading price of BTC should be around $170,000.
Bitcoin is now farther from its true value compared to when it last exceeded $10,000 in September 2020.
Bitcoin
Bitcoin
$116,638
The founder of crypto asset management firm Capriole Investments stated that Bitcoin is expected to trade at $167,800 per coin if the price matches its "energy value."
In a post on X on Thursday, Charles Edwards stated that the true value of Bitcoin is about 45% higher than its current value of $116,000.
"Fair value" for Bitcoin requires a price increase of 45%.
Bitcoin miners hold the key to predicting the extremely high BTC price, which is expected to rise BTC/USD by about 50%.
Capriole's "energy value" metric for Bitcoin, created in 2019, claims that the correct price for Bitcoin, or "fair value", is "a function of energy inputs, supply growth rate, and a constant representing the fiat dollar value of energy."
While this means that BTC/USD should be zero if miners completely stop participating in the network, current standard hash rates indicate that Bitcoin is of no value at all.
Data from the Glassnode analytics platform indicates that the current hash rate - the total processing power allocated to the network by miners - is 1.031 zeta hashes per second (ZH/s), with the latest all-time high reached on August 4.
Average Bitcoin hash rate. Source: Glassnode
Edwards said, referring to the simple moving average (SMA), "Hash rates are soaring and the value of Bitcoin energy has just reached $145,000."
"This means the price is 31% below value."
Bitcoin energy value data. Source: Capriole Investments
The value of Bitcoin reached $167,800. The network fundamentals vary significantly from its price, which has dropped by about 10% since its record high last month.
Edwards added: "We are trading today at a deeper discount to value at $116,000, compared to what Bitcoin's price was when it was at $10,000 in September 2020."
Bitcoin price versus return to mean
As Cointelegraph reported, many market participants said the current rise in Bitcoin's price has only a few months left.
Related: Bitcoin supply shock could lead to "unlocking" Bitcoin price as OTC trading desks dry up.
This does not give the BTC price much time to match its energy value rating, which will decline if miners reduce the amount of energy they use.
Capriole said in an introduction to the metric: "The stability of energy inputs represents a balance between supply and demand. Rising market prices incentivize an increase in energy inputs through hash rate growth and technological improvements, leading to increased energy efficiency."
This is why large increases in market price usually lead to long-term increases in energy used, and thus an increase in the value of Bitcoin energy. However, when speculation causes a massive price spike without a corresponding increase in energy inputs, the price historically collapses back to the energy value.
Bitcoin hash ribbon data. Source: Capriole Investments
The Bitcoin Hash Ribbons metric continues to bolster healthy expectations for both miners and price performance after the recent "buy signal" emerged in late July.
