Alejandro Arrieche
The price of Bitcoin might be “cheaper than it looks” on the surface according to the Director of Global Macro of Fidelity, Jurrien Timmer.
In a Twitter thread published a couple of days ago, the investment professional cited that the price of BTC relative to the number of wallet addresses that currently deal with the token is lower than it was back in 2017 when the cryptocurrency entered its latest “winter season”.
Timmer provided a different perspective where he reaches a similar conclusion by stating that the value of the token relative to the number of non-zero addresses – those that contain at least some BTC in it – is trading below the network’s forecasted curve.
Is BTC cheaper than it looks? If we consider a simple “P/E” metric for BTC to be the price/network ratio, then that ratio is back to 2017 and 2013 levels, even though BTC itself is only back to late 2020 levels. Valuation often is more important than price. /THREAD pic.twitter.com/6XMPrtRUzF
— Jurrien Timmer (@TimmerFidelity) June 15, 2022
What this indicates is that, if Timmer’s forecasts are accurate, the value of Bitcoin (BTC) relative to these operating metrics is indicating that this might be an opportunity to buy the digital asset at a point when it seems undervalued from a fundamental perspective.
So far in 2022, the price of bitcoin has gone down nearly 55% while it is trading nearly 70% below its 52-week high as macroeconomic conditions across the globe are shifting.
Just yesterday, the US Federal Reserve hiked its benchmark interest by 75 basis points, this being the highest one-off hike that the central bank has pushed forward since 1994.
Higher rates typically lead to lower valuation for risky assets such as equities and cryptocurrencies as so-called risk premiums increase. What this means is that investors demand higher returns from risky asset classes as low-risk securities are now offering more attractive yields.
Your capital is at risk.
The Looming Risk of a Stablecoin Crisis for BTC
Stablecoins have been in the spotlight lately following the collapse of Terra’s algorithmic token UST. This event led to further scrutiny from regulators and policymakers as these instruments are increasingly being considered a risk for the stability of the financial markets.
This year alone, Tether’s flagship dollar-pegged token USDT has coped with billions of dollars in redemptions as investors are rushing to get their money out of the crypto realm at a point when the ground behind their feet seems to be shifting.
USDT, same as other tokens such as USDC, are described as reserve-backed digital assets whose peg to the North American currency is maintained due to their issuers’ claim that they hold a dollar in reserves for every token in circulation.
Even though the companies behind these digital tokens regularly issue reports that are audited by accounting firms within their respective jurisdictions, there is still some residual disbelief in regards to their ability to maintain the peg at times of extreme market turmoil.
Stablecoins are considered by many a key piece of the puzzle for the rise of the crypto market as they facilitate transactions by allowing investors to keep their money parked within the ecosystem. In addition, many decentralized finance (DeFi) protocols have been launched that enable lending, savings, and trading with these assets.
Therefore, their stability seems crucial to keep the value of all assets within the crypto market from falling off a cliff.
Other Predictions for Bitcoin for 2022 and Beyond
Multiple analysts have shared their two cents in regards to where BTC might be going this year and beyond including Scott Minerd, the chief investment officer for Guggenheim Investments, who stated that the digital asset is poised to succumb to the $8,000 level due to the Fed’s current “restrictive” approach.
Meanwhile, billionaire investor Tim Draper had a contrasting opinion as he reaffirmed his forecast of $250,000 for BTC by the end of 2022 or early 2023. Draper justifies his forecasts by stating that retailers have not yet figured that they could save at least 2% on every transaction paid with a credit card by accepting BTC.
Other related articles:
- How to Buy Bitcoin with PayPal?
- Best Crypto Exchanges in June 2022
- How to Trade Cryptocurrencies in June 2022?
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This article was written for Business 2 Community by Alejandro Arrieche.
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