The founder and CEO of on-chain analytics company CryptoQuant explains the peak position of Bitcoin's market capitalization based on the current hash rate.
Based on the network hash rate, Bitcoin's upper limit may be at this level.
In a new post on X, CryptoQuant founder and CEO Ki Young Ju discusses a BTC pricing model that uses the trend of mining hash rate to set upper and lower limits for the cryptocurrency's price.
The mining hash rate here refers to the metric that tracks the total computing power currently connected to the Bitcoin blockchain by miners.
Miners compete with each other using their computing power to be the first to solve certain mathematical puzzles and receive block rewards as compensation.
Given that without miners, BTC cannot exist, or at least if there is no decentralized network, BTC would not be as secure, some believe that hash rate can be used to measure the intrinsic value of cryptocurrency.
After all, Bitcoin miners must pay ongoing electricity costs to maintain the hash rate, and they are only willing to operate mines that are worth it.
The following chart shows that the BTC mining hash rate has been continuously rising recently and has reached an all-time high (ATH).
The reason behind this upward trend is the rebound that the asset has been observing; the price is the main variable for the income of these chain validators since the block subsidies they receive in BTC naturally fluctuate accordingly.
Speaking of block subsidies, one characteristic of the BTC network is that its value is permanently halved approximately every four years, an event known as halving. The consequence of halving is that BTC miners' income continually declines.
The pricing model shared by Young Ju takes this fact into account by adjusting the mining hash rate. The metric then takes the ratio of market capitalization to the adjusted hash rate and determines the highest and lowest values of this ratio in the asset's history.
Below is the chart of the model, showing what value the market capitalization of the asset needs to reach for this ratio to equal one of the two extreme values:
As shown in the above chart, based on the value of the current network hash rate, Bitcoin's maximum potential market capitalization is close to $5 trillion. The asset's market capitalization is slightly below $1.9 trillion, meaning it only accounts for 38% of this upper limit.
However, it is worth noting that the top of the 2021 bull market occurred below the top line of the model. Therefore, the peak of the current cycle may also not reach that line. That said, the market capitalization is indeed closer to the peak ratio from that time than it has been so far in this cycle, which may at least suggest that BTC has room for a rebound.
One peculiar aspect of the chart lines is that there are sharp declines in the years 2016, 2020, and 2024. This naturally corresponds to the halving events that occurred in those years and reflects their economic impact on Bitcoin mining.
BTC price
At the time of writing, Bitcoin's trading price is approximately $94,400, having risen over 2% in the past seven days.
