With Bitcoin recently sliding below the critical $60,000 threshold to hit a new cycle low, the cryptocurrency market is filled with questions about whether the asset has finally bottomed out.
In a recent market intelligence report, Grayscale tackled the pressing question: Is Bitcoin cheap yet?
According to Grayscale’s analysis, the answer is a cautious yes. Onchain data points to an undervalued asset, but prices have not yet reached the deep discount levels seen during previous market crashes, such as the post-FTX collapse.
Grayscale utilizes a composite on-chain valuation indicator to gauge Bitcoin’s market standing. This indicator is a weighted average of three distinct measures:
The aggregate unrealized profit or loss of Bitcoin holders relative to their onchain cost basis.
Bitcoin’s price relative to a long-term valuation benchmark based on coin-days destroyed.
When combining these metrics, the composite indicator indicates that Bitcoin’s current price sits well below its long-term average.
A shallower bear market?
Despite the recent price drop, Grayscale’s research indicates that the current bear market could be shallower than those experienced in the past. This optimism boils down to such factors as a muted bull market and improved market structure.
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Key catalysts to watch
Whether the market has truly found its bottom depends heavily on the latest developments surrounding the CLARITY Act. The progression of this critical regulatory framework through the Senate could have massive implications for market sentiment.
The amount of leverage should also be taken into account. The ability of large, leveraged Bitcoin holders to stabilize their balance sheets will be crucial in preventing further forced liquidations and downward price pressure in the short term.
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