On Monday (21 November 2022), Charles Edwards, Co-Founder of digital asset management firm Capriole Investments, took a closer look at the Bitcoin mining industry in the wake of a very painful crypto bear market that started one year ago.
Edwards took to Twitter earlier today to say:
“It’s a Bitcoin miner bloodbath. Most aggressive miner selling in almost 7 years now. Up 400% in just 3 weeks! If price doesn’t go up soon, we are going to see a lot of Bitcoin miners out of business… What we are seeing is not sustainable. Mine-and-hodl is not a viable strategy as a Bitcoin miner. Miners are paying the consequences of the ‘never selling’ arrogance widespread just 6 months ago. You need to manage (trade) your Bitcoin position constantly in this market… Any strategy which relies on long-term leverage (positions which can’t be exited immediately) ALWAYS blows up in crypto.“
On 2 November 2022, Edwards introduced his “Bitcoin Yardstick” metric is a very simple way to figure out how cheap/expensive Bitcoin is at any particular time:
Introducing: The Bitcoin Yardstick
Today we are seeing valuations unheard of since Bitcoin was $4K.
A very simple, rule-of-thumb Bitcoin valuation tool.
Bitcoin Yardstick = market-cap / hash-rate, normalized over 2 years of data.
As always: not investment advice.
A short🧵 pic.twitter.com/bsFk0hh9ra
— Charles Edwards (@caprioleio) November 2, 2022
He went on to say:
“Similar in concept to a PE Ratio, except instead of stock earnings, the Bitcoin Yardstick is taking the ratio of energy work done to secure the Bitcoin network in relation to price. Lower readings = cheaper Bitcoin = better value…
“Here’s an application of the Bitcoin Yardstick which identifies when Bitcoin is: – Cheap: Yardstick > 1 deviation under the mean – Risky: Yardstick > 2 deviations above the mean – Expensive: Yardstick > 3 deviations above the mean…
“Today we are seeing the second lowest reading for the Bitcoin Yardstick in all of Bitcoin’s history. This means that on a relative basis, Bitcoin is extraordinarily cheap given the amount of energy being used on what is the most powerful computer network in the world.“
According to data by CryptoCompare, Bitcoin is currently (i.e. as of 1:25 p.m. UTC on 21 November 2022) trading around $16,228, down 2.62% in the past 24-hour period. The current $BTC price is roughly 76.6% lower than the all-time high of $69,044 reached on 10 November 2021.
Featured Image via Pixabay