The founder of Capriole Investments noted that Bitcoin is still discounted by 40% compared to energy value. That’s what this is possible means.
Bitcoin Energy Value is currently at $130,000
In a new post on X, Capriole Investments founder Charles Edwards shares the energy value of Bitcoin today. “Energy Value” is a model designed to measure the ‘fair value’ of BTC, a function of the amount of energy used to produce it. Of course, the energy mentioned here is the energy miners consume their BTC mining missions globally.
Miners “produce” coins when adding a block to the chain and obtaining Avblock subsidies in return. Due to the existence of a feature called Difficulty, miners do this at a rate that is mostly constant, but about every four years, during an event called “halving”, production will drop permanently by half.
This means that the energy of the tokens that miners must use that generate cryptocurrencies will increase. Capriole’s energy value formula is explained by the supply growth rate of energy input into the delisted assets. In addition, it includes another factor: the Fiat constant that converts energy input into US dollars.
As published in a research paper written by Edwards, here is the view of the complete formula (in V) of energy value:
The Energy Value formula for BTC | Source: Capriole Investments
As the fair value of Bitcoin is directly related to the energy miners use in this model, switching to a more efficient machine will result in a decline in the valuation of assets, as they now use less energy to perform the same tasks as before.
However, miners have been steadily increasing their total computing power (called hashing) throughout the history of cryptocurrencies, so even if they are turning to more powerful models, their energy input will only increase because they are just using a higher number of machines.
Now, here is a chart shared by analysts showing where Bitcoin’s energy value is currently:
Looks like the asset is trading under this model | Source: @caprioleio on X
As shown in the above chart, the recent Bitcoin energy value has risen to $130,000, meaning the spot price of cryptocurrencies is currently trading significantly lower than this model. In the past bull market, assets have always seen the return of this line, and even far exceed this line.
Bitcoin has some understanding of this line in the current cycle, but so far there is no sustained break as observed in previous bull runs.
This is interesting considering that it has been a year since the last bitcoin halving (which happens to be the fourth such event in coin history). As mentioned earlier, these events squeeze BTC’s productivity, making assets scarce and higher energy inputs per token.
Now, will the past pattern repeat this period too, and the energy value pulls the price of the coin like a magnet.
BTC price
Bitcoin’s temporary drop is lower than $92,000, but the Bull seems to have returned to its base as the price drops to $94,400.
The trend in the BTC price during the past five days | Source: BTCUSDT on TradingView
Featured images from dall-e, capriole.com, charts from TradingView.com
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