Thread by @btcFairValue

There's no simple way to track the #bitcoin price discovery process.

We all know the Halving is the catalyst to a new price discovery cycle but that deals with the timing of the cycle not the pricing of the asset.

Here is a 🧵👇 detailing our indicator designed to output #BFV

1/ #Bitcoin fair value like any assets fair value starts with cost of production. No producer in the world is able to sell their good or service to a consumer for less than the amount it cost to produce or provide

COP therefore provides a floor price for any asset including #btc

2/ Mises said, "Where there is no free market, there is no pricing mechanism; without a pricing mechanism, there is no economic calculation."

The only way to measure free market is via demand. Demand can be measured against supply aka Stock to Flow (S2F)

But demand is complex..

3/ Demand must also be measured as an isolated variable that does not account for limited supply.

Network Value Transfered (NVT) is a more accurate measurement than S2F when it comes to the current free market demand for usage of the #Bitcoin network.

Finally...

4/ #BFV must account for the amount of energy or the amount of work (proof of work) that is required to maintain the network. This is known as Bitcoin Energy Value (BEV). Increased energy input increases fair value and decreased energy input decreases fair value

How to use it...

5/ Spot price will trade at a premium or discount to #BFV

Trading at a discount signals a strong spot buy and even a leveraging op.

Trading at a slight premium is a buying op.

Trading at 20%+ premium urges caution & reduce risk

Trading at 40%+ premium signals profit taking

This is the non-weighted version of our #Bitcoin fair value equation. If u prefer demand metrics more than value metrics, add more weight to the demand variables, or vice versa

This is our contribution to the market better understand the free market pricing mechanism for #BTC

This is not to be construed as financial advice.

#BFV indicator is for educational purposes as we all attempt to better understand the cyclical #Bitcoin price discovery process and ever-changing fair value.

Most traders lose. #HODL strong!

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#Bitcoin Fair Value = (Cost of Production + Stock to Flow + Network Value Transferred + Bitcoin Energy Value) / 5