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Bitcoin Is Extraordinarily Cheap, According to Yardstick Indicator

Wed, 11/02/2022 - 11:58
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Arman Shirinyan
Current price of BTC creates some serious problems for mining market
Bitcoin Is Extraordinarily Cheap, According to Yardstick Indicator
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The value of Bitcoin on the market has tanked a lot since reaching its all-time high in November, and some indicators confirm the thesis about the digital gold being extremely undervalued, despite the recovery we saw recently.

Yardstick indicator

The chain-based indicator works in a simple way to allow investors to properly evaluate Bitcoin without using any complicated analysis tools. The formula of the indicator simply divides the market capitalization of the cryptocurrency by the hashrate, normalized over two years of data.

The metric works in a similar way to the PE ratio, but instead of stock earnings, the Yardstick takes into account the ratio of energy work done for securing the Bitcoin network in relation to the price.

As of today, the indicator shows the second lowest reading in the asset's history, which means that the current value of the cryptocurrency makes it extraordinarily cheap considering the energy volume used to back up its network.

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Technically, the imbalance between the value necessary to cover the sustainability of the network and BTC's market price is what determines its relative value. With the hashrate of the network rallying to new highs, energy consumption rising and Bitcoin trading at multi-month lows, we can safely say that undervaluation is a correct assessment.

Miners are feeling lack of balance

As we already mentioned, the amount of power needed to maintain the Bitcoin network right now is nowhere near the value at which the cryptocurrency is trading. According to the profits of individual miners and companies, the lack of fair valuation creates serious issues.

At press time, the digital gold is trading at $20,440 and losing around 0.2% of its value in the last 24 hours.

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About the author

Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.

Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.