Bitcoin reaches fair pricing amidst energy expenditure analysis

Bitcoin, the leading cryptocurrency, has surged to just under $70,000, marking a significant milestone in its price trajectory. According to Charles Edwards, the founder of Capriole Investments, this price point signifies a crucial juncture where Bitcoin is now deemed “fairly priced” in terms of the energy expended by miners to sustain the network. Edwards’ analysis, based on on-chain data, suggests that at around $70,000, Bitcoin has attained its intrinsic value, as measured by the energy input into the network.

Energy-based valuation

Capriole’s Bitcoin Energy Price metric, developed by Edwards, indicates that Bitcoin’s current price reflects its fair value based solely on the energy miners consume. Edwards emphasizes the simplicity of this approach, devoid of complex formulas or power laws. He asserts that energy alone determines Bitcoin’s fair value, aligning with its fundamental principles. This marks the first time since late 2020 that Bitcoin has reached such fair pricing, according to the metric.

In addition to fair pricing, Edwards highlights the resurgence of profitability among Bitcoin miners. Despite the impending block subsidy halving, miners are experiencing solid profit margins buoyed by the breakout of Bitcoin’s production costs. 

Edwards underscores the historical correlation between such breakouts and significant repricing, suggesting potential further upside for Bitcoin’s price. He contends that the era of undervalued Bitcoin has ended, ushering in a new phase characterized by momentum-driven market dynamics.

Market sentiment and future outlook

While some anticipate a protracted correction following Bitcoin’s all-time highs, others argue that institutional demand will continue to support the market. Venturefounder, a contributor to on-chain analytics platform CryptoQuant, emphasizes March’s significance for Bitcoin and Ether (ETH), the largest altcoin. 

He suggests that a definitive breach of current highs by both assets is crucial, particularly in light of the upcoming decision on spot Ether exchange-traded funds (ETFs) in the United States.

According to Venturefounder, March is important in the current market cycle, especially following a bullish February. He asserts that failure to achieve new all-time highs in March could lead to downside pressure in April and May, potentially coinciding with the halving event and the awaited decision on Ether ETF approval. These developments could significantly influence the trajectory of Bitcoin and Ether prices in the coming months.