The latest Bitfinex Alpha report highlights that the bitcoin price is increasingly undervalued when compared to the S&P 500 index. according to a technical analysis based on ordinary least squares regression based on the last 200 days.
The goal of this analysis is to establish a fair value for the bitcoin price based on the current S&P 500. Using an Ordinary Least Squares (OLS) regression analysis on bitcoin and S&P 500 prices over the past 200 days, a fair value of $27,550 has been determined for Bitcoin.
With the current bitcoin price hovering around $25,000 as of this writing, the analysis implies an undervaluation of approximately $2,500 compared to the estimated value.
Percentage difference between bitcoin and fair value – Source: Bitfinex
This price discrepancy indicates an undervaluation of more than eight percent in the price of bitcoin relative to its estimated fair value. Importantly, this undervaluation is the most significant since mid-February, suggesting that bitcoin’s current price may not fully reflect its perceived value relative to the S&P 500 over the past 200 days.
TO As stocks show an increase while the bitcoin price remains relatively stable, the potential for a possible offsetting rise in bitcoin’s value increases. The current rally in stocks, especially in the technology sector, coupled with bitcoin’s price stability, could set the stage for a future recovery of the asset.
BTC 30-Day Pearson Correlation Metric – Source: Bitfinex
A possible bounce opportunity is seen in the connection between bitcoin (BTC) and the S&P 500, based on data provided by the Pearson metric, a continuous measure of connections calculated over a period of the last 30 days. Currently, the connection value is -0.54, as shown in the figure above. It is important to note that this negative reading has occurred only once in the last twelve months and on a few occasions in the history of the asset.
If there is a bounce in the BTC-S&P500 correlation, this could have significant implications for investors and analysts. The positive connection between bitcoin and the S&P 500 could indicate a greater alignment between the movements of the cryptocurrency market and the traditional stock market. This could open up opportunities for investors looking to diversify their portfolios or take advantage of fluctuations in both markets.
Another factor supporting the possibility of a bounce in the BTC-S&P500 connection is the behavior of the connection between Bitcoin and gold. Historical data shows times when Bitcoin has shown an inverse connection to gold, suggesting the possibility of a similar relationship with the S&P 500.
The latest Bitfinex report highlights that current data indicates a possible rebound opportunity in the match between bitcoin and the S&P 500, which could have significant implications.
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