Introducing Volatility-Adjusted Power Law Index

An actionable metric for judging over/undervaluation of Bitcoin.

The metric is derived from the Power Law model and is adjusted for volatility to correct for changes in Bitcoin's market structure over time.


1/ High Accuracy
It correctly identifies the bottoms and tops of all prior cycles.

2/ Stable Range Over Time
A problem with many of the existing indicators and oscillators is that their meaning and ranges change over time. Take MVRV (one of the current bests) for example. It went as high as 7 in cycle 1 but went only up to 3.95 in the cycle 4. This makes judgement for the next cycle very challenging.

However, VPLI's oscillation range remains stable over all four past cycles because it is adjusted by market structure in each period.


3/ Regions of Overvaluation and Undervaluation
- Deep Value (<-10): 10% of time
- Value (-10, -5): 25%
- Cool (-5, 0): 25%
- Warm (0, 5): 20%
- Hot (5, 10): 15%
- Extreme Bubble (>10): 5%

* The percentages indicate the % of time the index spends in each region


The article detailing this metric and its methodology will be published in the next edition of the Bitcoin News Research newsletter. Subscribe using this link!

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Bitcoin News Research is a collaboration between @BitcoinNewsCom and @21st_capital

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@Sina_21st @Nebraskangooner, @SimonDixonTwitt, and @JSeyff talk Bitcoin investment strategy.

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📚 In this 15-minute YouTube video, we discuss our newly developed Bitcoin valuation model that indicates where Bitcoin stands at any point in time relative to the "fair price".

PS: This is our new YouTube channel with new branding. We will post video summaries of our research there. Please give it a follow if you are interested in this content.


https://www.youtube.com/watch?v=z3vfteUjnHs

VPLI UPDATE

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Now available on Youtube. Please, subscribe to our YT channel if you find value in our videos.

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