According to Jurrien Timmer, global head of macro at Fidelity, Bitcoin is undervalued and oversold.
Jurrien Timmer, who has 126,000 Twitter followers, explained that while Bitcoin has fallen back to 2020 levels, its “price-to-network ratio” has fallen back to where it was in 2013 and 2017. annual levels, which may represent undervaluation.
Is BTC cheaper than it looks? If we consider a simple “P/E” metric for BTC to be the price/network ratio, then that ratio is back to 2017 and 2013 levels, even though BTC itself is only back to late 2020 levels. Valuation often is more important than price. /THREAD pic.twitter.com/6XMPrtRUzF
— Jurrien Timmer (@TimmerFidelity) June 15, 2022
In the traditional stock market, investors use price-to-earnings (P/E) ratios to measure whether a stock price is cheap or expensive, and overvalued or undervalued. If the ratio is high, it means that the value of the asset is overvalued. On the contrary, a low ratio means that the value of the asset is undervalued.
Jurrien Timmer posted a graph of Bitcoin’s demand curve, which shows the overlap of Bitcoin’s non-zero addresses (at least where there is a little bit of Bitcoin) and its market cap, noting that Bitcoin’s price is now below the network curve.
The macro analyst also posted another chart using Glassnode’s Dormancy Flow indicator, which he noted shows how technically oversold Bitcoin is.
Entity-adjusted dormant traffic is a popular metric for judging Bitcoin’s value by comparing price and spending behavior. This indicator shows traders the ratio of the current cryptocurrency capitalization to its total dollar value.
According to Glassnode, low dormant traffic may indicate increased belief among long-term holders, meaning long-term Bitcoin holders are taking over from anxious short-term holder sellers.
“Glassnode’s dormant traffic metrics are now at levels not seen since 2011,” the analyst said.
Morgan Creek Digital co-founder Anthony Pompliano echoed a similar sentiment on Monday, explaining that Bitcoin’s “value and price are deviating” and that “weak hands are selling to strong hands.”
“What we’re watching is a shift from short-term holdings of weak players to long-term oriented strong players,” Anthony Pompliano said.
Bitcoin’s fear and greed index has fallen to 7 on the 15th, which means it has fallen into the “extreme fear zone” and is also the lowest level since the third quarter of 2019. In the past, indexes fell into low gear, often representing a buying opportunity.
Both Fidelity Investments and Jurrien Timmer remain bullish on Bitcoin. Fidelity Investments has worked to launch a Bitcoin Retirement Investing Program, allowing people in the U.S. with 401(k) savings accounts to invest directly in Bitcoin. Timmer predicts that Bitcoin will soon see a recovery in the price of the currency.