Bitcoin, trapped in a tight bear grip, has been searching for the next catalyst for a price breakout after hitting a 2019 high of nearly $14,000. BTC’s price has been falling since then, dropping as low as $6,500 yesterday and further frustrating investors. The pioneer cryptocurrency has, however, slightly recovered to $6,682.31 at press time.
Now, analyst Charles Edwards has forecasted that the trigger that could usher in the next bitcoin bull run could come from a little-known indicator: bitcoin energy value oscillator.
Bitcoin Energy Value Indicator
Despite a tumultuous week or two, bitcoin could be on the verge of a bull run, at least according to Capriole Investments’ digital asset manager Charles Edwards. He suggested that the bitcoin energy value indicator is currently flashing bullish and could signal an impending BTC rally, owing to the fact that the present scenario is eerily reminiscent of previous price cycles. However, there is one major proviso for history to repeat itself: bitcoin’s hash rate has to soar.
Bitcoin’s hash rate increased from 41 TH/s in January to over 110TH/s in October, according to data provided by BitInfoCharts. It has stabilized in the past two months between 75TH/s and 106TH/s, further proving that miners are not capitulating. As suggested by bitcoin’s energy value oscillator, a massive rally will follow if BTC’s hash rate records a steady uptrend.
BTC Might Be Preparing For A Bull Run
In a detailed medium post, Edwards observed that there is a relationship between the amount of energy value on the network and bitcoin’s price.
The energy value oscillator determines bitcoin’s price as a percentage of its energy value. The formula for deriving the energy value entails the energy output, supply growth rate and a constant that represents the dollar value of energy. With that in mind, the analyst then plotted the results over the last ten years, uncovering an undeniable correlation between bitcoin’s energy value, its historic price and also the popular Stock-to-Flow model.
Based on this formula, bitcoin’s fair value on December 12 should have been $11,500, which is a far cry from the current level below $6,800. Edwards further noted that buying bitcoin at the current price would mark a lower than average risk but with a higher than average possible reward.
Both the 2013 and 2017 bull runs that saw bitcoin hit record highs were preceded by the price slumping to lower than 50 percent below the price predicted by the energy value metric before rising soon afterward. Therefore, if historical precedent is of any relevance, a major bitcoin rally could be just around the corner.