Bitcoin's Underestimated Value: A Deep Dive into Divergent Trends
Leading analytics firm Santiment has stirred discussions in the crypto world, asserting that Bitcoin is "arguably undervalued." This bold claim is rooted in a significant shift in Bitcoin's historical market behavior, particularly its recent divergence from traditional assets like Gold and the S&P 500.
Bitcoin's Decoupling from Traditional Assets
For the past four years, Bitcoin has generally maintained a correlation with Gold and the S&P 500. However, recent trends have seen this correlation break, with Bitcoin underperforming significantly. Since August 11th, Bitcoin has experienced a 15% decline. In stark contrast, during the same period, the S&P 500 has climbed 7%, and Gold has surged by an impressive 21%. This stark difference in trajectory suggests a decoupling, implying that Bitcoin's movements are no longer directly tied to these traditional indicators, or that it's experiencing a negative correlation.
Unpacking On-Chain Metrics: Support and Resistance
Further supporting the undervaluation thesis, on-chain analytics firm Glassnode highlights Bitcoin's current positioning between two critical on-chain price levels. Utilizing the "Supply Quantiles Cost Basis Model," which maps Bitcoin price levels to the percentage of supply held in profit, Glassnode notes that Bitcoin had surpassed the 0.95 quantile during its previous all-time high, meaning over 95% of its supply was in unrealized profit. The subsequent drawdown pushed the price below both the 0.95 and 0.85 quantiles. Currently, the 0.95 quantile acts as a significant barrier around $108,500, while the 0.75 quantile serves as crucial support at approximately $100,600. These levels are historically significant for defining market direction. These on-chain indicators suggest a pivotal moment for Bitcoin. Should it break above the $108,500 resistance, it could signal a strong upward trend. Conversely, a fall below $100,600 might indicate further downward pressure. As of writing, Bitcoin trades around $105,000, showing a modest 2.5% gain over the last seven days, poised at these critical junctures.
