Analyst: BitMEX Data Suggests Bitcoin is Fairly Valued at $8,800 to $9,300

Once again, Bitcoin (BTC) is trading under $10,000. In fact, as of the time of writing this article, the cryptocurrency is sitting around $9,500 — up 0.8% in the past 24 hours.

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While some cynical analysts are expecting for BTC to spike lower, one investor suggests that per his analysis of a number of data points, the asset’s “inferred price” or fair value isn’t that much lower than current prices.

Max Keiser on the Bitcoin Price

The past few weeks haven’t been all too kind to BitMEX.

A week or two back, the popular cryptocurrency derivatives exchange was revealed to be under investigation by the U.S. Commodity Futures Trading Commission (CFTC). Also, an equivalent authority in the U.K., the Financial Conduct Authority (FCA), purportedly unveiled plans to restrict access to BitMEX’s suite of products and similar vehicles.

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Due to this unfortunate set of news, the Bitcoin platform began to see less volume and capital flight, as investors using the exchange presumably weren’t all too pleased with the encroaching regulatory presence.

According to Max Keiser, a long-time Bitcoiner that began touting the good word of Bitcoin in 2011, this trend implies that Bitcoin is currently temporarily overvalued.

#Bitcoin down as @BitMEXResearch unwinds highly leveraged positions. When I interviewed @CryptoHayes he said the avg. leverage (on a scale of 0-100x) was 20. Extrapolating that number, adding recent outflow data, and you get a (temporary) inferred BTC price of $8,800 – $9,300.

— Max Keiser (@maxkeiser) July 27, 2019

Per his analysis, which took the claimed average leverage of Bitcoin positions on the exchange into account and the capital outflow, Keiser suggests that BTC has a “temporary inferred price of $8,800 to $9,300”.

$9,300 is around 2% lower than the current price; $8,800 is around 7% lower than the current price and lines up with the short-term $8,500 price target that has been put forth by a number of Bitcoin analysts.

Bloomberg Story Has Traders Spooked

So what exactly has users of BitMEX running scared? Well, it’s the prospect that the CFTC will discover U.S. consumers illegally using the platform.

This fear, as aforementioned, has culminated in a seeming unraveling of BitMEX’s market structure. The day after the Bloomberg story, $85 million worth of BTC fled the exchange.

Also, since then, the average value of withdrawal transactions from the exchange’s wallets has tripled, implying some form of capital flight.

To only solidify these statistics, the average daily volume for the exchange’s derivatives contracts, the most popular of which is the XBT/USD (Bitcoin-to-USD) pair, dropped significantly. Trading volume on the exchange has, in fact, dropped by 50%, implying that there is less interest in using the platform than before.

And to make matters worse, Alex Kruger, a prominent pro-crypto markets researcher and economist, has pointed out that even during peak times, he has observed 1-2 price ticks a minute for Bitcoin, implying a “low liquidity chop”.

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