Bitcoin has started showing signs of being undervalued relative to its network fundamentals, providing potential buying opportunities for investors according to analysts.
Illia Otychenko, lead analyst at CEX.IO, said there’s been a surge in active Bitcoin addresses—up by 39% over the past week. That signals increased demand and liquidity, he said.
Otychenko also noted a sharp drop in Bitcoin’s Network Value to Metcalfe Ratio (NVM). NVM measures the relationship between Bitcoin's market value and the activity on its network, indicating potential under- or overvaluation. And now, the Bitcoin NVM is at levels not seen since its all-time high—suggesting the cryptocurrency could be trading below its intrinsic value.
"Historically, when active addresses surge like this, it often precedes or accompanies price increases," Otychenko told Decrypt.
The NVM metric has been a reliable indicator in the past, as it did in late 2022 and September 2023, when BTC saw price recoveries following similar drops in NVM, he added.
Currently, Bitcoin is trading down 0.6% at $62,120, struggling to maintain levels above key technical indicators. It remains sandwiched between the 200-day simple moving average (SMA) and the 50-day SMA, a situation that mirrors 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 essential.
"Bitcoin needs to push above the 200-day SMA and sustain those levels to see further upward momentum," Otychenko said. However, the gains over the past week have come with decreasing volume, suggesting a lack of strong bullish momentum.
On a broader level, analysts like Brian Dixon, CEO of OTC Capital, are rethinking Bitcoin’s traditional characterization as a purely risk-on asset.
"Recent analyses, including from major financial institutions like BlackRock, are challenging the view of Bitcoin as only a risk asset," Dixon told Decrypt. He highlighted the evolving narrative of BTC behaving more like gold during economic downturns, pointing to its potential role as a risk-differentiated 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 might offer protection against market volatility in ways that traditional assets might not," Dixon added, furthering the case for its adoption as a hedge against traditional market downturns.
In terms of institutional flows, Bitcoin ETFs have seen mixed results.
On Tuesday, the total net outflow from Bitcoin spot ETFs reached $18.6 million, with the Fidelity Bitcoin ETF (FBTC) leading the outflows at $48.8 million. However, the BlackRock ETF (IBIT) saw an inflow of $39.5 million on the same day.
Spot ETFs that track Ethereum, which has remained relatively stable, saw a total net outflow of $8.1 million from spot ETFs on October 8, data from SoSo Value shows.
At the time of writing, the Bitcoin price BTC was trading down 0.6% at $62,050 and Ether is trading flat at $2,432, according to data from CoinGecko.
BTC's immediate price action remains contingent on upcoming macroeconomic data.
Alex Kuptsikevich, senior market analyst at FxPro, noted that the Federal Reserve’s meeting minutes and the upcoming Consumer Price Index
(CPI) inflation data could serve as triggers for Bitcoin’s next move. "Potential triggers to break out of this range could be Fed minutes or U.S. inflation data if they lead to a reassessment of expectations in traditional markets," Kuptsikevich said, in a note to Decrypt.
Edited by Stacy Elliott.