This week Bitcoin has again developed bearishly after a rise of 18% in the previous week. Market sentiment is generally negative, analysts expect further losses and a return to the $6,000 region. Is BTC still overvalued?
According to Metcalfe’s laws, Bitcoin is overvalued
Bitcoin dipped again today during early Asian trading and fell in just over an hour by almost 3%. According to Tradingview, the digital asset dropped to 7,100 US dollars and has been traded just above that since then.
The recent drop brings the total loss from the weekend to 8%, as all last week’s gains are dwindling again. From here, there is pretty much no support for 2019 down to the mid $5,000 level.
BTC could rest in the low $6,000 zone if it returns to the most traded price of 2018. The overview page of Tradingview signals a “strong sell”, while the “Bitcoin Fear and Greed Index” has dropped to an “extreme fear” rating of 24.
Another metric is the LongHash-Token valuation table, which is based on the Metcalfe Act. The result is that the value of a network is proportional to the square of the number of users in it.
The report on this:
“We have established a valuation model for crypto assets such as Bitcoin that takes into account the unique addresses of daily active users based on the Metcalfe law.”
The scale ranges from -2.5 to bubble risk 2.5 in terms of rating. BTC is currently at 1, which is “overrated”.
This is surprising considering that Bitcoin corrected over 50% this year when it crashed to $6,550 last week. One thing is certain: there will be more pain if you take the signals seriously.
Almost all crypto analysts agree, as their charts show further declines with lows around $6,000. However, with one small caveat, because the prediction model only takes into account network activity, so the accumulation of unconfirmed transactions can cause a discrepancy.
And: The network activity model shows a worse picture the more people hodl instead of using BTC for payments.
Is Ethereum undervalued?
With the same metrics, Ethereum has much more positive results: ETH achieved a value of -0.3, which places the coin at the lower end of the fair value range. ETH today dropped to $ 145 – the lowest price since March.
Bitcoin’s price is currently down 64%, while Ethereum is closer to 90% – so you can also say that ETH is currently undervalued.