Why Bitcoin at 118K could be cheaper than it looks

Bitcoin has eased to around $118,800 after briefly touching $122,000 earlier this week. While the retracement has prompted some traders to call for cooling momentum, valuation models based on network fundamentals point to a different story - one where the market may still be underpricing Bitcoin’s longer-term potential.

One of the most telling measures is the Energy Value model, which currently places Bitcoin’s fair value between $145,000 and $167,800. That implies BTC is trading at roughly a 31% discount to the value of the energy consumed to secure its decentralised network - a gap last seen in the pre-bull run phase of 2020.

Key takeaways

• Bitcoin’s Energy Value range: $145,000–$167,800 vs current spot at $118,800.

• Current discount is deeper than when BTC traded at $10K in 2020.
  

• On-chain data shows retail traders dominating recent activity, while institutional flows remain light.
  

• Miner metrics such as Hash Ribbons suggest ongoing network confidence.
  
  

Energy Value model signals undervaluation

Developed by Capriole Investments, the Energy Value framework treats Bitcoin like a commodity, where the cost of energy used to secure the network serves as a baseline for fair value.

At present, the model’s simple moving average sits near $167,800, well above current market prices. Founder Charles Edwards notes that the current discount is larger than in September 2020, when Bitcoin was trading at $10,000 before embarking on a multi-month rally.

While history doesn’t guarantee a repeat, such a large gap between network value and market price has historically been rare — and has often preceded major upward moves.

Source: Capriole Investments, X

Institutions remain cautious

Despite this fundamental undervaluation, institutional activity remains subdued. While ETFs and corporate treasuries such as MicroStrategy - which holds over 628,000 BTC - continue to maintain their positions, there has been little sign of large-scale buying during this pullback.

On-chain execution data shows an increase in small trade sizes, suggesting recent flows have been retail-driven. In previous bull cycles, whale accumulation - often visible as a rise in large-lot orders - tended to precede major breakouts.

Source: CryptoQuant

Analysts suggest that a sustained move above $125,000 could be the trigger institutions are waiting for before re-engaging aggressively.

Miners reinforce the bullish case

Bitcoin’s hash rate remains near record highs, indicating miners’ continued commitment. The Hash Ribbons indicator - which flashed a “Buy” signal in late July - supports this narrative.

The model signals miner capitulation followed by recovery when the short-term hash rate dips below the long-term average and then rebounds. In past cycles, these buy signals have often marked the early stages of sustained rallies.

Source: Capriole Investments, TradingView

Miners’ willingness to commit more energy aligns with the Energy Value model’s upper range, adding further weight to the argument that Bitcoin may be trading below its true network value.

Retail-led trading and its implications

The rise in retail participation typically brings more volatility, as smaller traders tend to react quickly to price swings. However, this phase can also lay the groundwork for institutional buyers to step back in if a stable floor is established.

Potential macro catalysts - such as a September Federal Reserve interest rate cut - could create the conditions for renewed institutional inflows.

Bitcoin technical levels

At present, BTC is consolidating after its pullback, with sellers aiming to test the $118,000 zone. Buy volume has increased, indicating that selling pressure may be weakening.

A rebound from current levels could face resistance at $120,000, while deeper corrections may find support at $116,000. Stronger floors remain at $108,000 and $101,000, aligning with previous consolidation areas.

Source: Deriv MT5

Frequently asked questions

Why is the Energy Value model important now?

It shows that the network’s energy cost is significantly higher than its market price, which has historically been a setup for potential appreciation.

Are institutions buying?

Not aggressively. Most large holders are maintaining positions, with fresh buying likely to require a technical breakout.

Are miners signalling confidence?

Yes. High hash rates and a recent Hash Ribbons buy signal indicate strong network health.

What could drive further upside?

A clear break above $125,000 could entice institutions back in, especially if macro factors turn supportive.

Investment implications

Bitcoin’s current price is well below energy-based fair value estimates, and miner behaviour reinforces network strength. While institutions are on the sidelines, retail activity has created a potential base from which larger players could re-enter.

If a breakout above $125,000 occurs, this pullback could be remembered as a strategic accumulation period. For now, the discount between market price and network valuation suggests that Bitcoin at $118K may indeed be cheaper than it looks.