Some analysts believe that Bitcoin (BTC) is still undervalued and has a lot of room to grow.
One of them is Charles Edwards, founder of digital asset management company Capriole Investments. Edwards recently tweeted a chart showing the relative divergence between Bitcoin's price, historical price base (Bitcoin Electricity Cost) and fair value (Bitcoin Energy Value).
According to Edwards, Bitcoin's fair value stands at $45,321, which is approximately 75% higher than the current price of $25,821 at the time of writing. Edwards also said that in order for Bitcoin to cover energy costs, it must trade at $21,641, which is its historical price base.
The analyst claimed that this offers a risk-reward ratio of 5:1, excluding cases of hype and assuming that the uptrend will stop at the fair value level if bullish.
Edwards' Bitcoin Energy Value is a model that estimates the fair value of Bitcoin based on the amount of energy consumed by the network. The idea is that the more energy used to secure and verify the chain, the more valuable Bitcoin will be.
Edwards claims that Bitcoin energy value shows a strong correlation with Bitcoin's spot price, indicating that the theory is at least somewhat valid.
*Not investment advice.