Cryptocurrency analytics firm Alphractal has examined the current valuation of Bitcoin using the Short-Term Flow Fair Value metric and clarified whether BTC is cheap or expensive in the current market conditions.
The Short-Term Flow Fair Value metric measures the relationship between new Bitcoin issuance and its absorption by the market. It takes into account the following:
- BTC inflows and outflows on exchanges affecting trading liquidity.
- Miner supply as miners frequently sell BTC to cover operational expenses.
- Transaction fees play a role in supply and demand dynamics.
A high Short-Term Flow Fair Value indicates that more BTC is being absorbed by the market, reducing selling pressure and potentially supporting the price. Conversely, a drop in this metric indicates that more coins are entering the market via exchanges and miner sales, increasing selling pressure.
Alphractal notes that the metric reached an all-time high in February but has recently started to fall. However, it remains high, indicating that Bitcoin’s absorption levels are still strong despite the recent pullback.
In addition to Short-Term Flow Fair Value, Alphractal also notes the Aggregate Funding Rate across exchanges. It is currently approaching negative territory but remains positive overall. Negative funding rates across major exchanges have historically been associated with local bottoms, suggesting a shift in market sentiment may be on the horizon.
*This is not investment advice.
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