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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 can help spot price disparity for long-term investment strategies and correlate the price changes with historical events (i.e., expensive Bitcoin during bull markets, Bitcoin becomes cheap during bear markets, Bitcoin became cheapest when FTX filed bankruptcy).

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Methdology

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

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