Bitcoin is currently trading at a significant discount relative to the Nasdaq 100 index, which represents technology stocks. According to Ecoinometrics, the fair value of Bitcoin, based on its long-term correlation with the index, stands at around $156,000. However, its market price is approximately $110,000, hinting at a significant undervaluation by historical standards. Analysts recall that after a similar divergence in 2023, a robust price rally ensued, bolstering their bullish expectations.
Leverage Clean-up and Historic Decline in Futures
October witnessed a sudden price drop that reduced Bitcoin’s futures open position size from $47 billion to $35 billion, marking a contraction of over $12 billion. This is documented as one of the most substantial deleveraging events in the history of Bitcoin’s derivative market. Tom Lee, a BitMine and Fundstrat analyst, mentioned on CNBC that post the liquidation of significant leverage, a resurgence in organic demand could be anticipated in the market.
Data from Glassnode indicates that open options positions have surpassed $40 billion, suggesting a shift in investor focus from speculative leverage to defined-risk strategies. Analysts believe that instead of futures liquidations, option flows are beginning to shape price movements.
Strengthening Capital Rotation from Gold to Bitcoin
After a record surge, a sharp correction in the gold market is redirecting investors toward cryptocurrencies. Bloomberg’s report on October 22 highlighted that the steepest weekly drop in a decade in gold prices has caused alarm among even the most ardent gold bulls. Following the surpassing of $4,000 per ounce, Reuters reported many funds transitioning to high-risk assets.
Investor Anthony Pompliano pointed to a significant shift from gold to Bitcoin, noting historical cycles. Historically, Bitcoin has followed gold’s upward trend with a lag of approximately 100 days, which could manifest similarly this quarter. The inclination of young investors toward digital-native assets and Bitcoin’s limited supply support the notion that this transformation might be enduring.
A Long-term Opportunity on the Horizon
The 30% valuation gap compared to the Nasdaq fair value represents the highest discount in the last two years. As leverage clears, inflows into spot Bitcoin ETFs have stabilized.
Analysts suggest the current scenario is not a post-peak move but a phase of consolidation. If the bullish narrative continues, Bitcoin might quickly close its valuation gap, potentially initiating a new upward wave.
At the time of the article, BTC was trading at $111,617, showing a 0.14% rise over the previous 24 hours.