According to Fidelity, Bitcoin may be undervalued despite the fact that its price has halted its free fall, rebounding off the previous cycle's peak and rising beyond $21,000 Thursday.

Bitcoin has dropped by a staggering 26% over the past week, reaching a low of $20,193 on June 15. It has subsequently regained some calm and returned to $22,344 at the time of writing, but the asset's value is still 67 percent below its all-time high.

Director of Global Macro at investment firm Fidelity, Jurrien Timmer, has been investigating the price-earnings ratio (P/E) for Bitcoin, which corresponds to a price/network ratio given that Bitcoin is not a company.

According to the graph, the ratio has reverted to the same levels as in 2013 and 2017. He concluded that "value is frequently more significant than price."

In conventional finance, the price to earnings ratio is used to value a firm by comparing its current share price to its earnings per share.

This is not applicable to cryptocurrencies, since the price is determined by network activity. The network value to transactions ratio (NVT), as illustrated by technical analyst Willy Woo, provides a comparable perspective.

"The price is currently below the network curve," he noted. Using Glassnode's Bitcoin Dormancy Flow model, he demonstrated that the asset was now oversold.

Bitcoin has not been this oversold since 2011, 2014, and 2018 capitulation events.

This may be an indication that the bottom of the last market cycle is near, and this week's tremendous selloff may have been the final purge.

There is one other element that could lead to a final market decline comparable to that of 2018: Bitcoin miners.

This week, Bitcoin has been transferred to exchanges at historic amounts by miners. Yesterday, CoinMetrics announced that a net $1.94 billion worth of Bitcoin was transmitted to exchanges, an all-time record in terms of dollars. This amounted to an unprecedented daily total of 88,000 coins.

Miners must sell the asset to compensate for their rising power costs and remain operational throughout the crypto winter.

This massive liquidation could result in another large dump comparable to the over 80 percent drawdowns seen in past cycles.

If this occurs, Bitcoin values may possibly fall to around $12,000 very rapidly, representing an 82 percent decline from their all-time highs.

Meanwhile, Bitcoin moved dramatically after the Federal Reserve announced a rate hike in a desperate bid to contain rising inflation.

The move is yet another record-breaking policy rate hike, throwing the price of Bitcoin into a tailspin.