Bitcoin “Arguably Undervalued,” Says Analytics Firm: Here’s Why
Bitcoin is currently traded below its 4-year correlation trend with Gold and the S&P 500, with analytics firm Santiment suggesting it might be undervalued. Since August 11th, Bitcoin’s price has dropped 15%, while Gold has risen 21% and the S&P 500 by 7%, indicating a divergence from these traditional assets. Glassnode highlights BTC’s trading between key on-chain price levels based on the Supply Quantiles Cost Basis Model, with resistance around $108,500 and support near $100,600. Bitcoin is currently priced at approximately $105,000, up 2.5% in the past week.
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Bitcoin's Recent Performance Against Gold and S&P 500
On-chain analytics firm Santiment has highlighted that Bitcoin could currently be undervalued based on its 4-year correlation to Gold and S&P 500. Recently, Bitcoin has underperformed compared to these traditional assets. According to Santiment, while Gold has increased by 21% and the S&P 500 has risen by 7% since August 11th, Bitcoin has dropped by 15% over the same period. This divergence suggests Bitcoin and these assets may no longer be positively correlated.
The Shift in Correlation Between Bitcoin and Traditional Assets
Historically, Bitcoin has shown some level of correlation with Gold and the S&P 500. Correlation is observed when two assets move in reaction to each other's volatility. Santiment's analysis reveals that Bitcoin and traditional assets have diverged significantly in recent months. The price trajectories of these assets suggest either there is no longer a correlation or that a negative correlation might be at play. Despite this shift, Santiment argues that based on the cryptocurrency’s historical ties with these assets over four years, Bitcoin could still be undervalued.
Bitcoin's Position Between Key On-Chain Price Levels
Another on-chain analytics firm, Glassnode, has discussed Bitcoin's position according to the Supply Quantiles Cost Basis Model. This model identifies Bitcoin price levels based on the percentage of the supply that would be in profit if BTC traded at those levels. Currently, Bitcoin is trading between two critical levels. Upward, the 0.95 quantile is situated at $108,500, representing a supply profitability of 95%. Downward, the 0.75 quantile, acting as a cushion, is located around $100,600, representing a supply profitability of 75%.
Historical Role of Supply Quantiles and Implications for Bitcoin
Glassnode explains that these quantiles historically act as important support and resistance levels. A break above the 0.95 quantile could be a significant indicator for a new upward trend in Bitcoin’s price, while a break below the 0.75 quantile might signal further declines. These levels are likely to define Bitcoin's next directional trend. At present, they are key areas of interest for analysts observing BTC’s trajectory.
Current Bitcoin Price
At the time of writing, Bitcoin is trading around $105,000, showing a 2.5% increase over the past seven days. Despite the recent drawdown, these percentage changes provide a glimmer of hope for a potential recovery. Analysts will continue to monitor the interaction of Bitcoin’s price with crucial on-chain levels as outlined by Glassnode and other research organizations.