Bitcoin falls to lowest Power Law valuation zone since FTX collapse

After briefly falling below $66,000 on Wednesday, bitcoin BTC$66,946.93 is trading near the bottom of the Power Law corridor, a level that has historically come shortly before rebounds in the price of the largest cryptocurrency.

The model, popularized by physicist Giovanni Santostasi and refined by Porkopolis Economics, plots bitcoin’s price against time on a logarithmic scale and suggests that growth slows naturally as the network matures. It has tracked bitcoin’s price trajectory for more than a decade.

Unlike traditional cycle-based models that focus on the rate at which new bitcoin is created — it’s cut by 50% roughly every four years — the Power Law argues that bitcoin follows a long-term mathematical trend similar to patterns observed in nature, where growth decelerates over time.

According to checkonchain data, the Power Law Oscillator shows that when measured against the model, bitcoin has been more expensive than it is today for roughly 95.6% of its trading history.

Previous visits to these levels have coincided with periods of extreme market stress, including the March 2020 pandemic-driven selloff and the collapse of crypto exchange FTX in November 2022. Both events pushed bitcoin toward the lower edge of the model before significant recoveries followed.

While the Power Law offers no guarantee the floor will hold again, long-term investors view the current reading as a sign that bitcoin is trading near one of its deepest historical discounts relative to trend.