Leading crypto Bitcoin anchored at $25,000 under the influence of headwinds. However, Charles Edwards of Capriole Investments says this level is not fair at all. Edwards suggests that despite current headwinds, BTC’s fair value is around $45,000.
Fair value for Bitcoin: $47,200!
Bitcoin price is trading in a frustratingly narrow range between $25,500 and $26,500. It leaves investors unsure of the next direction this asset could take. However, Charles Edwards, founder of Capriole Investments, believes Bitcoin’s current price offers a low-risk long-term buying opportunity. Edwards’ view is based on Bitcoin’s production cost and energy value.
Capriole Investments energy value theory yields a fair value price of $47,200. Edwards reiterates his bullish stance, saying Bitcoin’s cost of production gives a base price estimate of around $23,000 with a 100% accuracy rate. The trade has a risk reward ratio of 1:5 and the potential for even higher price targets. But Edwards adds that this is based on the assumption that the rally price will stop at a fair value, which it never has been.
My favorite Bitcoin chart right now. The relative distance between Bitcoin's price, the historical price floor (Bitcoin Electrical Cost) and fair value (Bitcoin Energy Value). That’s a 5:1 risk-reward assuming no-hype and that price would stop at fair value, which it never has. pic.twitter.com/J2yuGcNX9q
— Charles Edwards (@caprioleio) September 7, 2023
Taurus energy value theory
Charles Edwards proposed the energy value theory of Bitcoin in December 2019. According to theory, it is possible to estimate the fair value of Bitcoin by the amount of energy required to produce it. The model assumes that the more effort put into something, the more valuable it is. As you follow on Kriptokoin.com, the amount of energy spent in Bitcoin mining increased in 2023 as mining companies increased their capacity and hashrate shares with the installation of new ASICs and prepared for the halving to be held in April 2024.
Bitcoin price chart with energy value indicator. Source: TradingViewAccording to Edwards, Bitcoin’s energy value does not reflect its true value. Bitcoin energy value showed a strong correlation with the spot price of BTC. This suggests that the theory is at least somewhat valid. However, the theory also has some caveats. One limitation is that Bitcoin’s energy value is not always correct. This is because mining energy efficiency can change over time. Additionally, the theory does not take into account other factors that could affect the price of Bitcoin, such as current demand and supply in the market and the steps miners will take ahead of next year’s halving.
Is Bitcoin preparing for further decline?
Crypto analyst Nivesh Rustgi evaluates the current technical picture of BTC. Bitcoin’s spot liquidity data on Binance shows buyers looking at the $24,600 level for support. However, most traders crowded around yearly lows. They also hope they catch on. Therefore, bull momentum seems to be waning.
Liquidation levels of Coinglass’s futures orders indicate that buyers are expecting a drop to $24,600. It also reveals that smaller liquidations extend up to $23,000. In particular, the price range between $25,000 and $25,500 has the most leveraged orders with significantly higher volumes. This makes them hot targets for traders.
Bitcoin futures liquidation heat map. Source: CoinglassIf the Bitcoin price drops to $23,000, the buyer’s faith will be tested. A decline below $23,000 would target the $21,451 and $19,549 levels from 2022 onwards.
Bitcoin support and resistance levels. Source: Jarvis Labs
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