Jurrien Timmer, director of global macrostrategy at Fidelity Financial Company, believes that bitcoin is undervalued and oversold.
If we consider the ratio of bitcoin value to the number of created cryptocurrencies, it turns out that this indicator fell to the values recorded in 2017 and 2013, and the coin has fallen in price to the level achieved at the end of 2020. Value is often more important than rate,” Timmer said.
In this case, Jurrien adapted the financial price/earnings indicator, which is widely used by analysts to determine whether a stock is overvalued or undervalued.
When this indicator falls, the security is considered undervalued and conversely, an increase in the indicator signals that the asset is overvalued. Instead of profit, Timmer used the number of addresses with a positive balance.
Jurrien also published a graph of the dynamics of the Dormancy Flow indicator, which correlates the level of bitcoin capitalization with the volume of transactions. The value of this thechanalysis tool has fallen to its lowest value since 2011. This means that the bitcoin market is in the extreme oversold zone, and a correction is inevitable.