As Bitcoin continues to slide, down $1,000 since Monday and dropping just below $10,000, Digital Asset Research, an institutional-grade crypto data and analysis company, has released the results of a new model that predicts Bitcoin will surpass $60,000 in less than a year.
The model is based on the stock-to-flow ratio, which compares the amount of a commodity in circulation divided by the amount produced per year. The ratio is typically used to forecast the price of gold and was popularized in crypto circles by analyst PlanB.
After crunching the numbers, Digital Asset Research says its results are close to those attained by PlanB, indicating BTC could hit $60,592 in May of 2020 before soaring well above half a million in 2024.
“Our findings are broadly supportive of the original analysis: the SF ratio has had explanatory powers (R Square of 91%) and is of sufficient statistical significance (t Stat of 181.3). The model predicts a bitcoin price of $60,592 in May 2020 followed by $732,256 in the 2024 halving.”
The study notes that it could take longer for BTC to cross $60,000 based on the leading crypto’s prior price action. Bitcoin’s bull runs have typically continued to climb after BTC’s halvings, which cut the reward miners earn for powering the network in half every four years.
“While the model predicts $60,595 in May 2020, in the two previous halvings the actual price didn’t reach 100% of model price until well after the halving. Based on an estimated halving date of 5/17/20, that puts model parity sometime in the year 2021 based on a similar lag. In other words, we’re still a ways off from knowing if these predictions will hold.”
Digital Asset Research says that ultimately time will tell if the stock-to-flow ratio will emerge as a leading indicator for predicting the future price of BTC.
“Our reading of the critiques combined our own analysis informs our belief that PlanB’s original research was correct, but perhaps incomplete. Looking at declining premiums to model and rhyming cyclicality lead us to believe that some other term or function is perhaps missing or undiscovered. Or it may simply be the case that Bitcoin as an asset can never be valued, merely priced, in the words of Professor Aswath Damodaran. It does seem that pushing the model at extreme boundaries produces some unbelievable outcomes, but we’re unlikely to be around to see what happens in the year 2140. That fact we’re fairly certain of.
Nevertheless, we find PlanB’s original findings and subsequent model an interesting addition to the discerning crypto investor’s tool kit. We look forward to further critiques and updates to the model and believe that open discussions can push our understanding of this asset forward. We look forward to testing the model with an out sample test at the next Bitcoin halving in May 2020. Until then, stay on target.”
You can check out the full study here.