Bitcoin is experiencing a significant valuation divergence, currently trading at approximately a 30% discount compared to its Nasdaq 100-implied fair value. This discount has raised eyebrows among analysts as it highlights the downturn in Bitcoin’s prices. According to data sourced from ecoinometrics, the fair value of Bitcoin, based on its long-term correlation with the tech-heavy Nasdaq 100 index, is estimated to be around $156,000. In stark contrast, the spot prices are currently sitting near $110,000.
This notable discrepancy, which places Bitcoin at one of its widest valuation gaps relative to Nasdaq in recent years, suggests a substantial undervaluation. Analysts from ecoinometrics emphasize that, unless one believes the current bull market has already concluded, the gap is likely to close as Bitcoin’s price aligns with its fair value.
Despite underperforming tech stocks in recent weeks, Bitcoin maintains a consistent correlation with major U.S. indexes, indicating a potential recalibration in the market rather than a full-scale collapse. The recent leap in risk appetite could lead to an influx of capital flowing back into Bitcoin, solidifying its market position.
Additionally, the October flash crash has had a profound impact on Bitcoin derivatives, leading to a wipeout of over $12 billion in open interest. Futures open interest plummeted from $47 billion to $35 billion due to widespread deleveraging. Many analysts interpret this dramatic contraction as a bullish indicator, suggesting that the excessive leverage has been effectively purged, thereby creating a clean slate for organic demand to re-enter the market along with renewed inflows from ETFs.
Tom Lee of Fundstrat noted that although the market is still recovering from this significant deleveraging event, the current open interest levels are at historical lows, with strong fundamentals backing both Bitcoin and Ethereum. He predicts that a crypto rally is likely before the year concludes.
Moreover, the options open interest in the market has overtaken futures by $40 billion, showcasing an evolution in market sophistication and a shift towards reduced speculative leverage. As highlighted by Glassnode, the transition in Bitcoin’s derivatives landscape signifies that options flows are starting to play a more influential role in determining price action, in contrast to relying on futures liquidations.
In parallel, gold’s once-bullish rally appears to be losing momentum. Reports suggest even the most steadfast gold proponents are beginning to recognize that the recent surge in prices feels overstretched following significant weekly drops. Analysts foresee that the extraordinary rise in gold prices, having surpassed $4,000 per ounce, is prompting investors to reassess its sustainability and to consider reallocating their investments towards higher-beta assets like Bitcoin.
Anthony Pompliano has identified an emerging trend of a “great rotation” from gold into Bitcoin, citing historical performance cycles where Bitcoin typically lags behind gold by about 100 days. The current market setup corresponds with this historical trend: as gold has been performing well for several months, Bitcoin is now perceived as a favorable buy due to its undervaluation in relation to equities.
Younger investors’ growing preference for digital, native assets is further reinforcing this trend, as Bitcoin’s inherent qualities—such as its portability and finite supply—enhance its appeal in today’s market. As liquidity searches for stable stores of value, Bitcoin seems poised to attract renewed investor interest.
For long-term investors, the significantly discounted Bitcoin price against its Nasdaq-implied fair value presents a compelling opportunity. An unprecedented 30% discount has not been observed in nearly two years, coupled with a cleared open interest and stabilizing institutional inflows. The current market conditions suggest an accumulation phase, indicating that if the bullish narrative holds, Bitcoin may swiftly bridge the valuation gap in the coming months, especially in light of potential capital rotation from gold back into Bitcoin. This scenario could serve as the catalyst for the next bull run, reigniting investor enthusiasm in the digital asset space.
