Bitcoin has recently slipped below $60,000 and set a new low for this cycle, and Grayscale has assessed that the current price has entered an on-chain undervaluation zone.

U.Today, a blockchain media outlet, reported on Tuesday that Grayscale answered "yes" cautiously in a recent market report when asked whether bitcoin is currently cheap.

The key basis is an on-chain valuation indicator. Grayscale used a composite metric that takes a weighted average of three indicators: unrealised profit and loss relative to holders’ average purchase cost; and the current price relative to a long-term value benchmark that reflects coin holding periods and movement. Taken together, the indicators suggest the current bitcoin price is significantly below the long-term average.

Grayscale drew a line, however, saying the current price has not entered a discount zone as deep as in past sharp downturns. The report noted that on-chain data points to an "undervalued asset", but it has not yet reached the "deep discount" levels seen during previous market shocks such as after the FTX collapse. That means some bottom signals are appearing, but it is too early to view it as an extreme capitulation phase like in the past.

It also judged that this downturn could be shallower than earlier ones. Grayscale said the recent bear market could unfold more gradually than in the past, citing a "weak bull market" and an improved market structure. It explained that the upswing itself did not overheat and that the market structure is more stable than before, which could limit the size of any sharp drop.

Grayscale pointed to regulation and leverage as variables market participants should watch immediately. It said whether the market has truly confirmed a bottom could be heavily influenced by recent developments around the Clarity bill. It said how that regulatory framework progresses in the Senate could have a major impact on investor sentiment.

From a short-term supply and demand perspective, it also said whether leverage is unwound is important. Grayscale said whether bitcoin holders using large-scale leverage stabilise their financial positions is a key variable in preventing additional forced liquidations and short-term downside pressure. It judged that if selling pressure from highly leveraged investors is not cleared, the price decline could continue further.

As a result, the current market can be summed up as a phase where undervaluation signals and uncertainty coexist. On on-chain indicators alone, bitcoin is below its long-term average, but if the handling of the regulatory bill and leverage adjustments are not completed, confirmation of a bottom could be delayed. The current price may look attractive, but it is difficult to conclude that the market has fully stabilised, it said.