Arbitrum (ARB) has become the fourth largest ecosystem in the cryptocurrency market with its total value locked (TVL) reaching $2.3bn. The network’s active user base crossed 600,000, surpassing decentralised finance (DeFi) rivals like Solana and Optimism (OP). Although the native token had lost 70% since its airdrop, ARB is also touted as a hidden investment opportunity as its price has a higher potential upside than its competitors, according to DeFi researcher Deebs. ARB’s use of Optimistic Rollups technology has addressed key issues in crypto, such as scalability and high transaction fees, making it attractive to investors.
This article originally appeared on www.newsbtc.com
In recent weeks, there has been a lot of talk in the cryptocurrency community surrounding the massive drop in the price of Bitcoin (BTC). Many investors have panicked as the price has fallen by more than 70% since its all-time high in December 2017. However, charts and data analysis indicate that the current price of Bitcoin may not truly reflect its actual value.
The first chart that holds significant importance is the Bitcoin Network Value to Transactions Ratio (NVT Ratio). This chart is very similar to the price-to-earnings (P/E) ratio of a stock in the traditional market. The NVT Ratio measures the market value of Bitcoin compared to the number of daily transactions. As such, it provides a good indication of whether Bitcoin is overvalued or undervalued.
The current NVT Ratio for Bitcoin is at a level last seen in 2015, when BTC was valued at under $200. The current ratio suggests that the value of Bitcoin is significantly undervalued compared to the number of daily transactions that are taking place on the network. This indicates that the current price of Bitcoin, despite its massive drop, may still be too high given the amount of usage on the network.
Another important chart to consider is the Bitcoin Mayer Multiple. This chart is similar to the price-to-book (P/B) ratio used in traditional markets. The Mayer Multiple measures the price of Bitcoin compared to its 200-day moving average price. If the Mayer Multiple is above 2.4, it suggests that Bitcoin is overvalued, and if it is below 1.0, it suggests that Bitcoin is undervalued.
Currently, the Mayer Multiple for Bitcoin is at its lowest level since 2015, indicating that Bitcoin is significantly undervalued. The chart shows that historically, when the Mayer Multiple has been at these levels, it has been a good time to buy Bitcoin, as prices have then gone on to reach new all-time highs in the following months.
Finally, we can also consider the Bitcoin Stock-to-Flow Ratio. This chart measures the total amount of Bitcoin in circulation compared to the rate of new mining supply being added to the network. Stock-to-flow (S2F) is a measure often used in commodity markets to understand the relationship between supply and demand.
Using S2F, we can determine the fair value of Bitcoin by comparing the current supply of Bitcoin to the rate of new mining supply being added to the network. Currently, the S2F Ratio suggests that Bitcoin is undervalued and that the current price does not reflect the high demand for Bitcoin in the market.
In conclusion, while many Bitcoin investors may be worried about the current drop in Bitcoin price, these charts suggest that the current price may not reflect the true value of Bitcoin. In fact, the charts show that Bitcoin is currently undervalued, and these historical levels have often been a good time for investors to buy and hold Bitcoin, as prices have eventually gone on to reach new all-time highs in the following months. As always, investing in Bitcoin or any cryptocurrency comes with its risks, and it is important to do your research and never invest more than you can afford to lose.
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