Capriole Founders Say Bitcoins Are Undervalued Compared to Energy Value Metrics

Capriole Investments founder Charles Edwards has highlighted a widening gap between Bitcoin’s market price and its intrinsic value based on the firm’s proprietary Energy Value metric. According to Capriole’s model—first developed in 2019—Bitcoin’s fair value is a function of energy input, supply growth rate, and a constant representing the fiat cost of energy per unit of network security.

In a recent analysis, Edwards noted that Bitcoin’s current trading level near $116,000 represents a discount of approximately 45% to the Energy Value estimate of $167,800. The discrepancy is deeper than during the September 2020 bear market, when Bitcoin last traded at $10,000 yet still aligned closely with energy-based valuation.

Energy Value calculates network health and security by aggregating total mining energy consumption and adjusting for system growth. As miners secure blocks, they consume energy; the metric captures this activity to derive a “fair” network valuation. Strong hashrate readings—currently at record highs exceeding 1.031 zettahashes per second—support higher intrinsic values, Edwards argues.

“Hash rates are flying and Bitcoin Energy Value just hit $145K, yet the market lags at $116K,” Edwards said. Historical data indicates that unsustainable price spikes without corresponding increases in energy commitment often revert toward the Energy Value baseline.

Capriole’s framework suggests that sustained market gains depend on miners maintaining or expanding their energy allocation. Conversely, large miner capitulations or energy cost shocks could force Energy Value downward and precipitate market corrections.

Supporting the bullish outlook, Bitcoin’s Hash Ribbons indicator—a measure of miner health—recently flashed a new buy signal in late July. The metric tracks miner state and recovery patterns following periods of network stress, historically coinciding with favorable price action.

Critics of the energy-value approach argue that innovations in mining efficiency and shifts toward renewable power alter the cost dynamics. Edwards counters that the model incorporates evolving energy mix factors and that transparency in energy sourcing reinforces metric accuracy.

Industry observers note the Energy Value concept has gained traction among major institutional players. With Bitcoin’s market capitalization nearing $2.3 trillion, the potential upside from energy-backed fair valuation could attract fresh capital inflows, especially as macroeconomic conditions and regulatory clarity evolve.