Alphapilot, AI-Driven Quant, Open to All.
Alphapilot, AI-Driven Quant, Open to All.
Date: 2025-09-16 09:16 UTC
Core Thesis:
Our analysis indicates that Bitcoin is in the midst of a fundamental repricing, driven by a structural shift in its demand profile and market composition. The asset is transitioning from a retail-dominated, speculative instrument to an institutional-grade macro asset, a process catalyzed by the 2024 approval of US spot Exchange-Traded Funds (ETFs). This has created a persistent, price-inelastic demand shock that is colliding with an increasingly constrained and algorithmically tightening supply. While significant volatility remains, driven primarily by macroeconomic policy and market leverage, the current price level presents a compelling entry point for investors with a 12-to-36-month horizon and an appropriate risk tolerance.
Bitcoin is a decentralized digital asset operating on a peer-to-peer network, distinguished by its provably finite supply of 21 million coins and its censorship-resistant properties. Its core value proposition has evolved over its 15-year history, encompassing roles as a medium of exchange, a store of value, and, most recently, a recognized component of a diversified investment portfolio.
The market landscape for Bitcoin underwent a seismic shift in January 2024 with the U.S. Securities and Exchange Commission's (SEC) approval of spot Bitcoin ETFs[1]. This landmark decision provided a regulated, accessible, and familiar gateway for institutional and retail investors, effectively bridging the gap between traditional finance (TradFi) and the digital asset ecosystem. As of September 2025, these ETFs have amassed over $151 billion in assets under management (AUM), holding approximately 6.6% of the total circulating supply[4].
This institutionalization is occurring against a backdrop of tightening supply dynamics. The fourth Bitcoin "halving" event in April 2024 reduced the daily issuance of new coins by 50%, from 900 BTC to approximately 450 BTC[6]. This programmatic supply reduction ensures that, ceteris paribus, less new supply is available to meet the burgeoning demand, creating a powerful tailwind for price.
In the broader market, Bitcoin maintains its position as the preeminent digital asset, commanding a market capitalization exceeding $2.28 trillion. While its correlation with traditional risk assets like the Nasdaq 100 has fluctuated, it has shown periods of strong positive correlation (reaching up to 0.5-0.8 levels), solidifying its status as a macro-sensitive asset influenced by global risk appetite and liquidity conditions[1], [10].
Given that Bitcoin is a singular, homogenous asset rather than a multi-divisional corporation, a Sum-of-the-Parts (SOTP) valuation is inappropriate. Its value is derived from the holistic interplay of its network effects, supply-demand dynamics, and its role within the broader macroeconomic environment. Therefore, we have adopted a multi-model Holistic Valuation Framework to triangulate a fair value. This approach avoids reliance on a single methodology and instead blends insights from distinct analytical lenses:
Our final quantitative target = is a weighted average of these models, reflecting our confidence in their respective abilities to explain Bitcoin's price behavior in the current market regime.
Our valuation is anchored to the market conditions and data available as of September 16, 2025. Key baseline inputs include a BTC price of $115,687.71, a circulating supply of 19,746,259 BTC, a U.S. 10-year yield of 4.05%, and an Effective Federal Funds Rate of 4.33%[2], [7], [8].
Metcalfe's Law posits that a network's value is proportional to the square of its connected users (Value ∝ n²). We use daily active addresses (DAA) as a proxy for 'n' to quantify this effect.
This model provides the most direct view of the current market's primary driver: the collision of institutional demand with inelastic supply.
The NVT ratio, calculated as Market Cap divided by the daily USD value of on-chain transactions, functions as a measure of valuation relative to underlying utility. A high NVT can suggest a speculative bubble, while a low NVT may indicate undervaluation.
This component assesses how changes in the macro environment, specifically interest rates and the U.S. dollar, could impact Bitcoin's valuation by altering the cost of capital and investor risk appetite.
The quantitative models provide a robust framework for valuation, but the story of Bitcoin in 2025 is one of profound qualitative shifts. These factors, while harder to model precisely, are critical in understanding the forces that will drive price beyond the spreadsheet, justifying an upward adjustment to our quantitative base case.
The single most important qualitative factor is the structural change in the demand side of Bitcoin's market. The US spot ETFs are not merely another trading vehicle; they represent the financialization and legitimization of the asset class. With over $151 billion in AUM and holding over 1.3 million BTC, these entities have become the market's dominant marginal buyer[12].
This demand is qualitatively different from previous cycles. It is largely passive, long-term oriented, and price-inelastic. It flows through regulated channels, is integrated into wealth management platforms, and is accessible via retirement accounts. This creates a steady, persistent "buy pressure" that systematically drains the available supply from exchanges. This effect is amplified by the high percentage (~74%) of supply that is classified as "non-liquid," meaning it is held in wallets with a history of accumulation, not trading[1]. The ETF demand is therefore competing for a shrinking pool of actively traded coins, creating a powerful supply squeeze dynamic that our flow model attempts to capture, but whose psychological impact may be even greater.
Beneath the price volatility, the Bitcoin network itself exhibits signs of robust health and conviction. The network hashrate, a measure of its security and computing power, remains at historically high levels, fluctuating between 0.85B and 1.06B TH/s[1]. This indicates a strong and committed mining industry, making the network exceptionally resilient to attack.
Furthermore, the high proportion of coins held by long-term holders points to a strong base of investors who are insensitive to short-term price swings. This "HODLer" cohort acts as a stabilizing force, absorbing volatility and providing a solid foundation of demand. While our NVT analysis suggests the current price is not cheap relative to on-chain transaction volume, this can be interpreted in two ways: either the price is overextended, or the market is increasingly valuing Bitcoin for its "digital gold" and store-of-value properties, which do not necessarily require high on-chain velocity. We lean towards the latter interpretation, believing the market is pricing in its potential as a long-term savings technology, a use case not fully captured by the NVT ratio.
The primary counter-narrative to our constructive thesis lies in macro-economic risks and internal market structure. Bitcoin's increasing correlation with traditional markets means it is no longer immune to global risk-off events. A significant tightening of monetary policy, as modeled in our macro overlay, remains the most potent threat and could easily override the positive on-chain and flow-based fundamentals in the short to medium term.
Internally, the market remains susceptible to deleveraging events. The derivatives market, with its high open interest and fluctuating funding rates, can create cascades of liquidations that lead to sharp, sudden price drops. An over-leveraged long position, indicated by persistently high positive funding rates, is a key risk indicator to monitor. Furthermore, while ETFs have diversified ownership, the concentration of assets with a few large custodians (e.g., Coinbase Custody) presents a centralized point of failure. A security breach or operational failure at a major custodian would have systemic consequences.
These risks are significant and prevent an outright "Strong Buy" rating. They necessitate a risk-managed approach to portfolio allocation and underscore why Bitcoin, despite its maturation, remains a high-volatility asset.
Our thesis is dynamic and depends on the evolution of several key variables. We have identified specific triggers that would cause us to revise our valuation and stance:
To arrive at our final 12-month price target, we synthesize the outputs of our quantitative models and apply a qualitative adjustment to account for the powerful, yet difficult-to-model, structural shifts in the market.
The table below summarizes the 12-month base-case price targets from each of our valuation methodologies, along with their assigned weights in our composite model. The weights are based on our assessment of each model's relevance in the current ETF-driven environment.
| Valuation Model | 12-Month Base Case Price | Weight | Weighted Value |
|---|---|---|---|
| Metcalfe's Law (Network Value) | $166,450.00 | 30% | $49,935.00 |
| Supply/Demand (ETF Flow Model) | $123,626.00 | 30% | $37,087.80 |
| Macro-Economic Overlay | $115,688.00 | 15% | $17,353.20 |
| NVT Ratio (Network Efficiency) | $106,345.00 | 15% | $15,951.75 |
| Other On-Chain Sentiment | $115,688.00 | 10% | $11,568.80 |
| Weighted Quantitative Target | 100% | $131,896.55 |
Our quantitative model, while comprehensive, struggles to fully capture the second-order effects of the institutionalization narrative—namely, the impact on investor psychology, the reduction in perceived career risk for asset managers, and the reflexive nature of price (higher prices attract more capital, driving prices higher). The persistent demand from ETFs and the strength of the on-chain holder base provide a structural tailwind that we believe justifies a premium to the model-derived value. We therefore apply a +8.0% qualitative adjustment to our weighted quantitative target.
We initiate coverage on Bitcoin (BTCUSD) with an Overweight rating and a 12-month price target of $142,448.27. The asset represents a compelling, albeit high-risk, opportunity for capital appreciation over a medium-to-long-term horizon (12-36 months).
This investment is suitable for investors with a high tolerance for volatility who are seeking exposure to a unique macro asset with asymmetric upside potential. We recommend a strategy of phased accumulation rather than a single lump-sum investment, allowing investors to average into a position and mitigate timing risk.
Entry points could be tiered, with initial allocations at current levels and further additions contingent on either significant price pullbacks (e.g., a retest of the $95k-$100k support zone) or the confirmation of a positive macro catalyst (e.g., a definitive signal of a Fed easing cycle).
This report is for informational purposes only and does not constitute investment advice or a solicitation to buy or sell any securities. Investing in digital assets, including Bitcoin, involves a high degree of risk, including the potential for partial or total loss of invested capital. Price volatility is extreme, and the market is subject to rapid and unpredictable changes due to regulatory, technological, and market-driven events. Past performance is not indicative of future results. Investors should conduct their own due diligence, consider their own financial situation and risk tolerance, and consult with a qualified financial advisor before making any investment decisions. The views and price targets expressed in this report are subject to change without notice.
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