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Description

The Bitcoin Yardstick is a metric for Bitcoin that attempts to measure the P/E ratio, which typically assesses the value of a company’s profits to its earnings to understand how valuable a company’s stock is. For Bitcoin, that is the perceived value of the network over the value of energy used to maintain it. There are three notable conditions: Cheap: Yardstick < -1σ under the mean Risky: Yardstick > +2σ above the Mean Expensive: Yardstick > 3σ above the mean

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Use Case

The Bitcoin Yardstick is a long-term valuation metric that helps identify periods of potential price disparity relative to historical norms. It is designed to support investment strategies focused on cyclical market behavior and to contextualize price movements in relation to major historical events. The metric enables users to observe patterns such as:
  • Overvaluation during bull markets, when Bitcoin tends to appear “expensive.”
  • Undervaluation during bear markets, when Bitcoin historically trades at relative discounts.
  • Extreme undervaluation conditions, such as those observed during major market disruptions (e.g., Bitcoin reaching its lowest relative value during the FTX bankruptcy in 2022).
The Bitcoin Yardstick can be used to inform macro-level positioning by correlating historical price trends with market cycles and significant events.

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Methdology

Bitcoin Yardstick = Market cap / Hashrate, normalized by a 2-year rolling Z-score