Bitcoin Could Be 50% Undervalued. Should You Buy It Right Now?

On June 5, Bitcoin (CRYPTO: BTC) slipped below the psychologically important $60,000 level for the first time since 2024, and it's priced near $61,800 on June 10. After its anemic price action over the last few months, the coin could be undervalued by at least one important metric by about 50%, suggesting those who buy it now could reap the benefits down the line.

So, should you buy Bitcoin right now? Let's take a look at the argument for it being undervalued.

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The case for Bitcoin being at a massive discount right now

Miners produce Bitcoin.

Those miners own large banks of mining rigs, which require capital to purchase, operate, and maintain. Their operating costs are closely tied to electricity prices, as their rigs consume a lot of energy to perform the computations required to mine the coin. When everything works as intended, the capital expenditures and operating costs incurred by miners get recouped by the Bitcoin they produce, which they can sell to the market whenever they choose.

The cost to produce a new Bitcoin varies based on factors such as overhead expenses, hardware costs, average expected electricity costs, and the network's mining difficulty. A few different estimates placed the average cost to mine 1 BTC at approximately $87,000 as of February, so Bitcoin is changing hands for significantly less than it costs to create.

That tends to encourage miners to take their production offline, which, in turn, eventually constrains supply, pushing the coin's price back upward and attracting miners back to production.

But there's more than one school of thought on how to calculate the coin's valuation.

Using an alternative (but still valid) approach that calculates the coin's value based on the amount of energy being consumed by the entire Bitcoin network to create one coin, Bitcoin's modeled fair value is somewhere around $118,000 today; this method is focused more on realized energy expenditures rather than predicted ones, and it doesn't consider the cost of capital expenditures or overhead. That means the asset could be priced at a discount of roughly 40% to 50%.

Should you buy it right now?

Energy value is just one lens to evaluate Bitcoin's valuation, and it isn't comprehensive. The coin is also highly affected by capital flows from Bitcoin exchange-traded funds (ETFs), liquidity, and macro shocks, and each of those factors is likely more influential for its price than any mining formula.

For someone planning to be a long-term holder, buying the coin at or below its production cost has rewarded patience before, but it tends to be a long process that unfolds over a few quarters. Therefore, the best move here is to dollar-cost average (DCA), buying a fixed amount of the coin on a schedule. If the coin dips more, you'll be buying it at an even deeper discount relative to its production costs.

Alex Carchidi has positions in Bitcoin. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.