Alphractal, an analytics firm, has assessed the current valuation of Bitcoin using the Short-Term Flow Fair Value metric to clarify whether BTC is currently cheap or expensive.
Short-Term Flow Fair Value Metric
The Short-Term Flow Fair Value metric measures the relationship between new Bitcoin issuance and its absorption by the market. It takes into account BTC inflows and outflows on exchanges affecting trading liquidity, miner supply as miners frequently sell BTC to cover operational expenses, and transaction fees that play a role in supply and demand dynamics.
Impact on the Market
A high Short-Term Flow Fair Value indicates more BTC is being absorbed by the market, reducing selling pressure and potentially supporting the price. Conversely, a drop in this metric indicates more coins entering the market via exchanges and miner sales, increasing selling pressure. The metric reached an all-time high in February but has recently started to fall, though it remains high, indicating that Bitcoin’s absorption levels are still strong.
Conclusion and Outlook
In addition to Short-Term Flow Fair Value, Alphractal also notes the Aggregate Funding Rate across exchanges, which is currently approaching negative territory but remains positive overall. Historically, negative funding rates across major exchanges have been associated with local bottoms, suggesting a shift in market sentiment may be on the horizon.
Current indicators show a strong level of Bitcoin absorption by the market despite shifts in the metric, potentially pointing towards changes in market sentiment.
