Per the stock-to-flow deflection chart, bitcoin is currently the most undervalued in its history over the previous ten years.
During the middle of the 2017 bull market, a similar situation occurred. Following then, the BTC price resumed its exponential rise.
Furthermore, bitcoin has deviated from its 11-year uptrend line. The deviation reaches 36% negative. This is an additional indicator that the value of BTC is undervalued and also indicates that there is space for upside. Previous bull market tops drove the main cryptocurrencies far above this trendline.
Stock-to-flow record deflection
Cryptocurrency trader @CryptoMichNL recently tweeted that bitcoin’s price deflection chart from the popular stock-to-flow model is at its lowest level in over ten years.
Today’s BTC price is hovering around $40,000, despite the fact that the model predicts it should be somewhat higher.
The last time such a big negative divergence happened was during the network’s early stages of development. In October 2010, BTC cost less than $0.1. (yellow circle).
Furthermore, the chart depicts another point in the history of the main cryptocurrency when the deflection was close to reaching current values (blue circle).
This happened in July 2017, during the last bull market, when bitcoin was worth approximately $2,000. A few months later, its value continued to increase at an exponential rate. This pushed it to a new all-time high of $20,000 in December 2017.
As a result, the stock-to-flow deflection chart provides more than just a broad indicator of BTC’s relative worth. It also adds to the case that the bitcoin industry is in the midst of a long-term bull trend.
The stock-to-flow model popularized by @100trillionUSD may be traced back to Saifedean Ammous’ now-classic book “The Bitcoin Standard.”
It expresses the stock, circulating supply, flow, or new production relationship of any item whose quantity increases over time. It is the circulating supply of coins in proportion to newly generated coins in the case of bitcoin.
This model’s strength stems from its historical performance and ability to account for halving cycles (colors). So far, the BTC price has remarkably closely matched the stock-to-flow model, suggesting that it may be used to forecast the future value of the largest cryptocurrency.
36 percent lower than the 11-year trendline
Another crypto market player and Pantera Capital CEO, @dan_pantera, released a graphic showing bitcoin’s price departure from its 11-year trend on Twitter yesterday. It demonstrates that the current price is 36% below the trendline.
Furthermore, the graphic reveals that during the course of its existence, the alpha cryptocurrency has only spent 20.3 percent of its time below the 0 percent threshold.
In retrospect, these were the greatest purchasing chances, which eventually resulted in substantial returns. Undervaluation is also prevalent, with the negative 36 percent threshold appearing numerous times throughout the current cycle. However, it never reached this degree in the last, considerably less severe cycle of 2015-2017.
This gives another reason why bitcoin’s behavior in the present cycle is more similar to that of 2012-2013 than the prior bull market.