Bitcoin (CRYPTO: BTC) could be significantly undervalued as Bitwise Head of European Research André Dragosch estimates its fair value at $197,000 based on global money supply trends.

Speaking on the Bitcoin Magazine podcast, Dragosch suggested that a potential AI bubble collapse, weakening U.S. dollar and improving global liquidity could fuel Bitcoin’s next major rally.

Dragosch explained that Bitcoin’s divergence from global money supply has reached its largest recorded level, despite their historically strong long-term relationship.

His liquidity-based valuation model suggests substantial upside if the asset catches up with global monetary expansion.

He also highlighted Bitcoin’s decoupling from the S&P 500, with their longer-term trend correlation falling to its lowest level since 2015.

Dragosch believes capital rotation from gold and AI-related equities into Bitcoin could help close this valuation gap.

He noted that Bitcoin ETFs have recently attracted inflows while semiconductor ETFs have experienced outflows, suggesting an early shift in investor preferences.

Could An AI Bubble Burst Fuel Next Rally?

Dragosch warned that tightening financial conditions could burst the AI investment bubble, triggering a broader market correction.

He noted that annual AI revenues must surge from $200 billion to $2.5-$3.5 trillion by 2030 to justify current investments.

Slowing AI spending, weak Chinese growth and European debt concerns could raise recession risks in 2027.

While Bitcoin may face short-term volatility, Dragosch expects central bank easing and a weaker dollar to eventually support a rally.

Bitcoin, A $10 Trillion Reserve Asset?

Dragoschsays Bitcoin could rival gold and government bonds as a global reserve asset, potentially reaching a $10 trillion market capitalization.

He expects greater sovereign wealth fund allocations and institutional adoption to support annualized Bitcoin returns of 30%-40% over the next decade.

Bitcoin-backed credit products, including those from Strategy (NASDAQ:MSTR), could also gain traction as traditional finance embraces digital assets.

Dragosch also warned that dollar strength and tighter financial conditions could delay Bitcoin’s recovery.

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