The scale prints the second lowest reading ever
As on-chain metrics converge to place a classic macro bottom for BTC/USD, a new filter suggests that Bitcoin is more oversold than the average trader thinks.
The Bitcoin Yardstick measures the ratio of bitcoin’s market capitalization to its hash rate – two primary metrics that, when compared to each other, provide basic price insights.
As Edwards explains, the lower the value, the “cheaper” bitcoin is — more hash rate is applied to lock in low-priced coins.
While he cautions that it is “not investment advice,” this has implications for potential buyers – much of the unrealized value lies in the amount of work done to secure Bitcoin’s supply while price suppression.
Currently, the Bitcoin network hash rate is close to an all-time high, while the price is down about 75% from its last all-time high in November 2021.
“Today we are seeing the second lowest reading of the Bitcoin benchmark in all of Bitcoin history,” Edwards commented:
“This means that, on a relative basis, bitcoin is very cheap given the amount of power used in the most powerful computer network in the world.”
Illustrative chart of the Bitcoin benchmark. Source: Charles Edwards / Twitter
Bitcoin hash rate continues
The scale fuels the concept of Proof of Work (PoW), the bitcoin network’s mining algorithm, and its ability to store and grow value over time based on productive activity. The Bitcoin Standard, the seminal book by academic Saifedean Ammous, places great emphasis on the idea.
Related: Bitcoin ‘double bottom’ stirs bulls as NVT signal predicts major move
Meanwhile, the reversal of the current scenario, where the price is high compared to the work done, occurred during the 2013 and 2017 bull market years.
In 2021, several spikes accompanied bitcoin’s double tops in April and November respectively, but none of them matched the size of the previous peaks.
Bitcoin scale chart. Source: Glassnode
As Cointelegraph reported, Bitcoin miners are under great pressure despite hash rate spread as profit margins shrink.
The summer has already seen a period of “surrender” for miners, with Edwards providing evidence of a recovery underway in August.
Bitcoin hash rate chart. Source: Blockchain
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