Definition. The Bitcoin Yardstick is a metric developed by Capriole Investments as a simple, rule-of-thumb tool for Bitcoin valuation. It is similar in concept to a PE Ratio, except instead of stock earnings, it takes the ratio of energy work done to secure the network in relation to Market Cap. The chart shows the Yardstick z-score (magenta) with shaded zones marking the author's three notable conditions, plotted over price (grey) and hash rate (faint orange).

Technical. Bitcoin Yardstick = Market Cap / Hashrate, normalized by a 2-year (720-day) rolling z-score:

• Yardstick = (ratio - sma(ratio, 720)) / std(ratio, 720)

Three notable conditions are defined as points of interest by the author, each shaded on the price axis:

• Yardstick < -1σ under the mean (yellow columns)
• Yardstick > +2σ above the mean (light blue columns)
• Yardstick > +3σ above the mean (blue-violet columns)

Interpretation. The Yardstick reads market valuation relative to the security work expended on the network. Values deep below the rolling mean (< -1σ) indicate the market is priced cheaply relative to the energy securing it, conditions that have historically coincided with bear-market lows and accumulation phases. Values stretching above +2σ and especially +3σ indicate price running well ahead of network security work, conditions characteristic of late-cycle euphoria. The 2-year rolling normalization keeps the measure comparable across cycles as both market cap and hash rate grow by orders of magnitude.

Notes. Coined by Capriole Investments (November 2022) — Introducing: The Bitcoin Yardstick. Built from Market Cap and Hash Rate. For a mining-stress complement, see Miner Capitulation Risk.