Bitcoin Energy Value Oscillator signals bottom and start of new bull run

Last Updated: 1 August 2022

The Bitcoin Energy Value Oscillator is a model that determines the “fair value” of bitcoin based on the amount of energy miners put into the network. According to the model, the bitcoin price always returns to the value of the energy put into the network. This means that according to the model, the value of bitcoin is zero when there is no more energy in the network.

Potential bottom for bitcoin?

At the time of writing, it appears that the Bitcoin Energy Value Oscillator has formed a bottom and that we are currently trading at a “discount.” That is, the actual value of bitcoin is higher than the current market price.

Based on this chart, we can at least conclude that bitcoin started a run-up more often than not after the bottom of this model. It will not provide certainty in this case, as there are more factors that influence the bitcoin price, but it will not have a negative impact on the price.

The model implies that a higher hashrate, provided the energy efficiency remains the same, means bitcoin is worth more. According to this model, the value of bitcoin is a function of energy input. This means that it completely disregards, for example, the growth of the network and the number of users.

Bitcoin on Sale

If the Bitcoin Energy Value Oscillator is truly a good reflection of bitcoin’s value, it would mean that we are currently trading about 13 percent below the actual value of bitcoin. So based on the model, bitcoin should be worth around $25,000 to $26,000 at the moment.

It is interesting to see that over a long period of time, the model manages to correctly predict the price more often than not. Nevertheless, the model is incomplete and leaves out several important factors. Like PlanB’s Stock-to-Flow model, it may be a nice tool, but it is not the ultimate truth when it comes to predicting bitcoin’s price.

  • Ivan Brightly

    Ivan Brightly is a leading cryptocurrency analyst and author with over 5 years of experience in the blockchain and digital asset space. He previously served as a senior analyst at a major cryptocurrency hedge fund where he led quantitative research and trading strategy development.

    Ivan holds a Master's degree in Finance from the London School of Economics and a Bachelor's in Computer Science from Stanford University. He is frequently invited to speak at fintech and blockchain conferences worldwide on topics spanning cryptocurrency trading, blockchain technology, and the future of digital assets.

    Ivan's commentary has been featured in several major finance and technology publications including Forbes, Bloomberg, and CoinDesk. He is considered one of the most insightful voices analyzing new developments in the cryptocurrency and blockchain industry.

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