Bitcoin's (CRYPTO: BTC) plunge around $61,000 has pushed on-chain valuation metrics into undervalued territory, though the asset remains more expensive than at prior cycle bottoms.

“Is BTC Cheap Yet?“

Zach Pandl, head of research at Grayscale wrote on June 9 that a range of on-chain indicators suggests Bitcoin is trading below its long-term fair value after falling to a new cycle low.

A composite valuation model combining three separate on-chain measures indicates Bitcoin is now undervalued relative to historical averages.

However, the signal is not as extreme as levels seen during major market capitulation events, including the collapse of crypto exchange FTX in 2022.

According to Grayscale, Bitcoin’s current drawdown appears less severe than previous bear markets due to a more moderate preceding bull cycle and structural improvements across the asset class.

Among the factors supporting the growing maturity of crypto market are the expansion of exchange-traded products, broader deployment across wealth management platforms and increasing institutional adoption.

Two Catalysts To Watch

While valuation metrics suggest Bitcoin is becoming attractive for buying, Pandl said determining whether the market has found a definitive bottom depends on two near-term factors.

The first is progress on the CLARITY Act, the proposed legislation aimed at establishing a clearer regulatory framework for digital assets in the U.S.

Grayscale remains optimistic about the bill’s prospects, though prediction markets currently indicate the outcome remains uncertain.

The second factor involves highly leveraged Bitcoin holders and whether they can successfully stabilize their balance sheets during the ongoing downturn.

Recent concerns surrounding leveraged Bitcoin-related entities have increased investor focus on balance-sheet resilience as prices continue to fluctuate.

Pandl said dollar-cost averaging may make sense for long-term investors seeking exposure to Bitcoin at discounted valuations.

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