Bitcoin is starting to show signs of being undervalued compared to its network fundamentals, presenting potential buying opportunities for investors according to analysts.
Ilya Utyshenko, lead analyst at CEX.IO, said there has been an increase in active Bitcoin addresses – up 39% over the past week. He said this indicates increased demand and liquidity.
Uteshchenko also pointed to a sharp decline in the Bitcoin Network Value to Metcalfe (NVM) ratio. NVM measures the relationship between Bitcoin’s market cap and activity on its network, indicating potential undervaluation or overvaluation. Now, the Bitcoin Network Value to Metcalfe ratio has reached levels not seen since its all-time high — suggesting the cryptocurrency may be trading below its intrinsic value.
“Historically, when active addresses rise in this way, it often precedes or accompanies price increases,” Otichenko told Decrypt.
He added that the NVM metric has been a reliable indicator in the past, such as in late 2022 and September 2023, when Bitcoin saw a price recovery after similar declines in NVM.
Bitcoin is currently trading down 0.6% at $62,120, struggling to hold above key technical indicators. It remains trapped between the 200-day simple moving average (SMA) and the 50-day simple moving average, a position that mirrors the price action from October 2023. For the cryptocurrency to break out of this consolidation, a move above the 200-day SMA with higher trading volume is necessary.
“Bitcoin needs to push above the 200-day SMA and hold those levels to see further upside momentum,” said Otchenko. However, gains over the past week have come on low volume, suggesting a lack of strong upside momentum.
On a broader level, analysts like Brian Dixon, CEO of OTC Capital, are rethinking Bitcoin’s traditional characterization as a purely risky asset.
“Recent analysis, including from major financial institutions like BlackRock, challenges the view that Bitcoin is simply a risky asset,” Dixon told Decrypt. He highlighted the evolving narrative that Bitcoin behaves like gold during economic downturns, pointing to its potential role as a risk-on or even risk-off asset.
This shift could redefine Bitcoin’s position in investment portfolios, making it a more attractive option for long-term diversification. “Bitcoin may offer protection against market volatility in ways that traditional assets may not,” Dixon added, strengthening the case for adopting it as a hedge against traditional market downturns.
In terms of institutional flows, Bitcoin ETFs have seen mixed results.
On Tuesday, net outflows from spot bitcoin ETFs totaled $18.6 million, with Fidelity’s Bitcoin ETF (FBTC) leading the way with outflows at $48.8 million. However, BlackRock’s Bitcoin ETF (IBIT) saw inflows of $39.5 million on the same day.
Ethereum-tracking spot ETFs, which have remained relatively stable, saw a total net outflow of $8.1 million from spot ETFs on October 8, data from SoSo Value showed.
At the time of writing, Bitcoin (BTC) is trading down 0.6% at $62,050, while Ether is trading flat at $2,432, according to data from CoinGecko.
Bitcoin spot price action remains contingent on upcoming macroeconomic data.
Alex Kuptskevich, Chief Market Analyst at FxPro, pointed out that the Fed meeting minutes and the upcoming CPI
Inflation data (CPI) could act as a catalyst for Bitcoin’s next move. “Potential catalysts for a breakout from this range could be Fed minutes or US inflation data if they lead to a reassessment of expectations in traditional markets,” Kuptskevich said in a note to Decrypt.