Bitcoin is starting to show signs of being undervalued relative to its network infrastructure, which analysts say offers investors buying opportunities.
CEX.IO's lead analyst Ilya Otychenko noted the increase in active Bitcoin addresses—a 39 percent increase over the past week. This indicates an increase in demand and liquidity, he said.
Otychenko observed that Bitcoin's Network Value to Metcalfe Ratio (NVM) has dropped significantly. NVM measures the relationship between Bitcoin's market value and activity on the network, indicating the potential for under- or overvaluation. And now, Bitcoin's NVM is at levels not seen since its all-time high – the cryptocurrency can trade below its intrinsic value.
“Historically, when active addresses increase like this, it often precedes or adds to price increases,” Otychenko told Decrypt.
The NVM gauge has been a reliable indicator in the past when BTC has seen a price recovery following similar drops in the NVM, as it did in late 2022 and September 2023, he added.
Currently, Bitcoin is down 0.6% at $62,120, struggling to maintain levels above key technical indicators. It remains sandwiched between the 200-day simple moving average (SMA) and the 50-day SMA, reflecting price action since October 2023. For the cryptocurrency to break out of this consolidation, move above the 200-day SMA. A high transaction volume is important.
“Bitcoin should push above the 200-day SMA and sustain those levels,” Otychenko said. However, last week's gains have been subdued in volume, indicating a lack of strong bullish momentum.
On a broader level, according to Brian Dixon, CEO of OTC Capital, analysts are rethinking Bitcoin's traditional characterization as a purely risk-averse asset.
According to Dixon Decrypt, “Recent analysis, including from major financial institutions such as BlackRock, is challenging the perception of Bitcoin as a risk-only asset. During the economic downturn, it highlighted the narrative of BTC's evolution as gold, suggesting its role as a risk-averse or even risk-averse asset.”
This shift could redefine Bitcoin's place in investment portfolios, making it a more attractive option for long-term diversification. “Bitcoin can hedge against market volatility in a way that traditional assets cannot,” Dixon added, continuing to frame the issue as a hedge against traditional market failures.
In terms of institutional flows, Bitcoin ETFs have seen mixed results.
On Tuesday, total net outflows from Bitcoin spot ETFs reached $18.6 million, led by outflows from the Fidelity Bitcoin ETF (FBTC) at $48.8 million. However, the BlackRock ETF (IBIT) saw an inflow of $39.5 million on the same day.
Spot ETFs, which track the relatively stable Ethereum, withdrew a total net $8.1 million from spot ETFs on Oct. 8, data from Soso Value showed.
At the time of writing, the price of Bitcoin was up 0.6% at $62,050 and Ether was trading at $2,432, according to data from CoinGecko.
BTC's immediate price action is dependent on upcoming macroeconomic data.
Alex Kuptsykevich, senior market analyst at FxPro, noted the Federal Reserve's meeting minutes and the upcoming Consumer Price Index.
(CPI) inflation data could act as a trigger for Bitcoin's continued movement. “Potential triggers for exiting this range could be Fed minutes or US inflation data if traditional markets re-evaluate expectations,” Kuptsikevich said in a note to Decrypt.
Edited by Stacy Elliott.
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