Bitcoin’s Deflection To S2F Model Suggests An Undervalued Coin

The Bitcoin market along with the remaining spot is undergoing a seesaw-like movement. This has resulted in the undervaluation of Bitcoin, however, the digital asset was already set on the recovery path.

Bitcoin price declined under $10.5k on 13 September, but like its previous trends, the market was currently recovering. The digital asset is being traded at $10,587k, but the data suggests that it is currently undervalued.

Bitcoin undervalued, suggests S2F deflection

Data provider, Glassnode Alerts provided a screenshot of the Bitcoin Stock-to-Flow Deflection [1d MA] which noted the metric reaching a 17-month low.

📉 #Bitcoin $BTC Stock-to-Flow Deflection (1d MA) just reached a 17-month low of 0.594

Previous 17-month low of 0.595 was observed on 17 March 2020

View metric:https://t.co/0UZ5xdWxRV pic.twitter.com/0J4SmnHr2g

— glassnode alerts (@glassnodealerts) September 14, 2020

According to the chart above, the deviation of Bitcoin with the S2F model is extremely low at 0.594. A deflection larger than 1 puts the asset in the overvalued category, while under 1 is considered to be undervalued. The current value suggested that Bitcoin was significantly undervalued and a similar low at 0.595 was last visible close to the Black Thursday event in March.

Will the price rebound anytime soon?

Even though the price of Bitcoin was consolidating lower, this was not something unexpected by the prominent trader and the creator of the stock-to-flow of the Bitcoin price model, Plan B. With August coming to an end and the Bitcoin putting another “red dot” on the S2F chart since May, the analyst believed that the digital asset was targeting $288k S2F price ‘like clockwork’.

Even though this was Plan B’s stance before the tremendous pressure pushed BTC’s valued under, not much has changed in the aftermath of the fall. As per Plan B, “it’s about to get very interesting” and his S2F model predicted BTC’s price to reach $288,000 by the time of its next halving. Although, with dropping prices it was difficult to believe Plan B remained bullish of Bitcoin and its price.

In light of the global economic struggles, Bitcoin acted as a hedge against quantitative easing and garnered attention from mainstream institutional participants. This was changing the narrative of Bitcoin in the world of traditional finance and among large institutional clients. The analyst provided an updated S2F version to the 2019 time series model and it suggested that it was time for the value to go up.

Up and Up?

Even though 2020 has kept traders at the edge of their seats, the movement of Bitcoin was not breaking away from the pattern much. The phase of the asset being undervalued calls the attention of buyers in the market, as the digital asset once again prepares to shoot for the moon.