May 15, 2024 - Economy
Charted: Bitcoin yardstick
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Bitcoin's not expensive right now by one measure.
Zoom in: The bitcoin or hashrate yardstick is a metric used to determine whether the price of the world's largest digital asset is expensive or inexpensive.
- ✌️ Generally, a ratio above 2 indicates a relatively more expensive BTC.
Between the lines: Think what the price-to-earnings ratio is for stocks.
- Take the total market cap of bitcoin and divide by the hashrate (energy required to expand and secure the network).
- When buying stocks, one generally wants to buy when P/E ratios are lower relative to history, or peer stock ratios, or the market or by whatever level some financial analyst deems appropriate.
Flashback: The metric was flashing a neutral signal in the first three months of the year, per Fidelity Digital Assets Q124 report, saying bitcoin was considered "cheap" for zero days in the quarter.
- "This should be carefully considered because a higher standard deviation of the mean has historically preceded bull markets," according to that report.
- The yardstick was at 3 or above right before the 2021 peak.
💭 Our thought bubble: Take it with a grain of salt.
- 🔭 Per Wintermute chief Evgeny Gaevoy's observation: Charts, graphs and pattern-watching are just "astrology for men."
