Bitcoin Remains Undervalued Following the 2nd Quarter Rally
According to one price metric, Bitcoin (BTC) is still a bargain even though it has carved out solid gains in the second quarter. Based on CoinDesk’s a BTC Price, the cryptocurrency is trading to almost $9,450, rising nearly 47% so far this quarter. Also, it has gained 145% from the low of $3,867 seen on March 13.
Even with the recent increase, the Mayer Multiple of Bitcoin (the ratio of the crypto’s price to its 200-day moving average) recently stood firm at 1.15, as stated by MayerMultiple.info.
In a 2.4 ratio, it shows that the cryptocurrency is undervalued. If the ratio successfully rises above that level, it means that Bitcoin might be overbought, and a speculative bull frenzy is on the way. Most of the time, this ends up a price bubble and a subsequent crash.
For example, the ration boosted over 2.4 on December 1, 2017. After that, Bitcoin doubled in value to as much as $12,000 on December 22. Likewise, an above 2.4 ratio marked market tops back in April 2013 and December 2013.
Thus, with the ration currently down to over 50% from the key 2.4 level, the path of least resistance for Bitcoin seems to be on the higher side. Moreover, BTC’s Mayer Multiple remains under its lifetime average of 1.44.
Based on Mayer Multiple’s twitter handle, the ratio became higher than the recent level of 1.15, nearly 52% of the time. Econometrics – a Bitcoin analysis company – tweeted that this is an excellent time to stack sats. And it is referring to satoshis, small divisions of BTC.
In addition to that, simulations performed by Trace Mayer, Mayer Multiple’s founder, illustrated that previously, an investor would have reached much better results by accumulating Bitcoin when the ratio was under 2.4.
Nevertheless, Mayer Multiple is a technical analysis tool. Aside from that, its accuracy in foretelling undervalued and overvalued conditions are not guaranteed.
Also, expecting past performance to hold steady for future performance is risky. And this is because market conditions often change. Bitcoin’s correlation with the equity markets, for instance, has strengthened this year. So, the cryptocurrency might suffer steep losses of stocks crash on renewed coronavirus worries.
But, on-chain activity is supportive of the bullish outlook painted by the Mayer Multiple. The amount of Bitcoin whales or entities holding more than 1,000 coins currently surged to 1,844. And this would be the highest level since November 2017, as noted in a report on Wednesday.
Moreover, the retail interest is at record highs too. And this information came from the tweet of Ciara Sun, head of global business and markets, and vice president at crypto exchange Huobi.
Then, there is a continuous accumulation of Bitcoin by both retail and massive investors. And this means there is a confidence in the long-term bullish narrative surrounding BTC. If that confidence is justified or not, people will know in the coming days.
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