GlossaryBitcoin Energy Value
Bitcoin Energy Value
A valuation model for Bitcoin based solely on the network's energy use: how much energy goes into securing the network, measured against the rate at which new coins are created, and what that is worth in US dollars. The result sits as a line over the price and serves as a slow reference for fair value.
How to read it
As a slow reference line. Historically, the price has rarely been well below the model value, and mostly near cycle lows; a price far above it is normal for long stretches. More important than a single crossing is the direction: when the energy value rises, the energy used per newly issued coin is growing, for example in the year after a halving: the annual issuance is cut in half, and Stock-to-Flow gradually doubles.
Limitations
- Efficiency frozen: Since April 1, 2023, the model has used a fixed hardware efficiency. Real miners have become more economical since then, so the network uses less energy than the model assumes. Since then, the energy value has tended to come out too high.
- Fixed assumptions: The fiat factor, lost coins and inflation factor are set values, not measurements. They determine the level of the line, not its shape.
- Warm-up period: Stock-to-Flow needs a year of circulating supply, so the first value appears one year after the start of the series.
- Bitcoin only, intended for daily to weekly charts. The only settings are for appearance.