Bitcoin is priced well below its true value, according to experts, but there's still potential for significant declines

On-chain data suggests that Bitcoin’s value has been reduced, but analysts warn that a rapid recovery is not expected.

There are early indications of the “dust settling” in the crypto market, with investors now believing that the worst of the Terra (LUNA) collapse appears to be over. When looking at Bitcoin’s chart, it is evident that while the fallout was widespread and severe for altcoins, Bitcoin (BTC) has actually performed well. Even though May 12’s drop to $26,697 marked a low price level since 2020, various indicators suggest that current levels may represent a good entry point into BTC.

BTC/USDT 1-day chart. Source: TradingView

This level is notable because it was a retest of Bitcoin’s 200-week exponential moving average (EMA) at $26,990. The researcher states that this measure has historically been predictive of future price movements.

BTC/USD vs. 200-week EMA vs. 14-week RSI. Source: Delphi Digital

On May 12, the cryptocurrency market was not only knocked down, but it also had a terrible day. Since the start of the Terra saga, the stablecoin market has seen its highest degree of volatility and departure from dollar parity, with Tether (USDT) seeing the greatest deviation among major stablecoin projects as shown in the graph below from blockchain data provider Glassnode.

Stablecoin prices during Terra’s meltdown. Source: Glassnode

The events of the past two weeks have shaken investors’ confidence in their ability to maintain a dollar peg. The four most valuable stablecoins by market capitalization have all returned to within $0.001 of their dollar peg, but the belief in their capacity to retain has definitely been damaged by recent events.

As a consequence of the market downturn, Bitcoin is now approaching its real value since 2020.

The realized price has historically been quite consistent, according to Glassnode, “provided sound support during bear markets and has provided signals of market bottom formation when the market price trades below it.”

Bitcoin prices have previously dropped for much longer periods of time than they did during the current bear market, which began in 2019 and is expected to last until 2021. However, the length of time Bitcoin stayed beneath its real price has decreased with each cycle, with Bitcoin spending just seven days below its realized price during the bear market of 2019–2020.

Days Bitcoin spent below its realized price during previous bear markets. Source: Glassnode

It’s unclear if BTC will fall below the market price if the current bear market conditions persist, and if so, how long it will last. On-chain data show that many cryptocurrency investors were unable to resist the allure of buying Bitcoin at less than $30,000 over a three-day period beginning on May 12 and continuing through May 15. Some experts, on the other hand, warn against taking this as an indication that a quick recovery is imminent.

According to Delphi Digital, who added that, “the longer we see price build in these areas, further continuation becomes more likely.”

Delphi Digital said, “In the event this happens, look for the following levels: 1) Weekly structure and volume structure support at $22,000–$24,000; 2) 2017 all-time high retests of $19,000–$20,000.”

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