Analyst Claims ‘Fair Value’ of Bitcoin is $47K

Bitcoin’sprice is trading in a narrow range between $25,500 and $26,500, leaving crypto traders unsure of where the asset may go next.

Charles Edwards, founder of Capriole Investments, is confident that today’s crypto price presents a low-risk long-term buying opportunity. Edwards’ view is based on Bitcoin’s (BTC)production cost and energy value.

Capriole Investments energy value theory gives a fair value price of $47,200, and Edwards reiterated his crypto bullish stance by saying that Bitcoin’s production cost gives a floor price estimation of around $23,000 with a 100% hit ratio.

The crypto day trading has a risk-reward ratio of 1:5, with the potential for even higher price targets, but Edwards added it is based on the assumption that the crypto rally “would stop at fair value, which it never has.”

Bullish energy value theory

In December 2019, Edwards proposed Bitcoin’s energy value theory, which assumes that the more work that has been put into something, the more valuable it is. According to the theory, the fair value of Bitcoin can be estimated by the amount of energy it takes to produce it.

In 2023, the amount of energy spent in Bitcoin mining has been on the rise, as mining companies increased their capacity and share of hash rate with the installation of new ASICs and by preparing for the crypto halving in April 2024.

Edwards believes that the Bitcoin energy value reflects its fair value, and this is supported by the strong correlation between Bitcoin’s energy value and its spot crypto price.

However, there are some limitations to the theory. For instance, Bitcoin’s energy value is not always accurate, as mining energy efficiency can vary over time, and the theory does not take into account other factors that can affect the crypto price, such as the current demand and supply and the steps taken by miners ahead of the crypto halving next year.

Bitcoin looks primed for further downside

The spot liquidity data of Bitcoin on Binance reveals that buyers are eyeing the $24,600 support level. However, the crypto bullish momentum is slowly fading as most traders are gathering around the yearly low levels and hoping that they hold.

CoinGlass futures orders liquidation levels indicate that buyers anticipate a downside to $24,600, with smaller liquidations stretching to $23,000.

Notably, the most leveraged orders in considerable volumes are located between $25,000 and $25,500, making them attractive targets for crypto day traders.

Should the crypto btc price drop to the $23,000 level, the buyer’s confidence will be tested. A plunge below $23,000 would target the $21,451 and $19,549 levels from 2022.