One of Germany’s biggest banks just released a massive Bitcoin price prediction.
According to Munich-based BayernLB, a key indicator shows BTC is on track to hit $90,000 after its next halving.
The report is based on Bitcoin’s stock-to-flow ratio, which is often used to forecast the future price of precious metals like gold by calculating the current supply divided by the amount produced per year.
“What is certain is that Bitcoin’s stock-to-flow ratio will increase drastically in May 2020 – i.e. after the next halving – from around 25.8 at the moment to almost 53. By contrast, gold’s stock-to-flow ratio (currently in the vicinity of 58) will only be insignificantly (if at all) higher next May.
If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000 (the current model value is roughly USD 7,500).”
According to the report, Bitcoin’s digitally capped supply of 21 million coins makes it an “ultra-hard” type of money.
“…The stock-to-flow approach is a good heuristic for understanding Bitcoin. It becomes clear that Bitcoin is designed as an ultra-hard type of money.
Next year, it will already exhibit a similarly high degree of hardness as gold. In 2024 (when halving is set to take place again), Bitcoin’s degree of hardness will again increase massively.
Whereas gold has had to earn its high stock-to-flow ratio ‘the hard way’ over the course of millennia, Bitcoin’s purely digital character enables ‘supply engineering,’ which causes the stock-to-flow ratio to rise at a breakneck pace.”
The report warns that it’s early entering the market and extremely risky to invest in Bitcoin and crypto, noting that the stock-to-flow ratio may end up to be a lousy indicator in the long run.
“As a forecaster, one knows only too well that even the best statistical model can fail miserably when attempting to predict the future.
Undoubtedly the biggest acid test for the stock-to-flow model will be next year’s halving. In the meantime, the stock-to-flow approach will serve, at any rate, as a good heuristic for understanding Bitcoin. It becomes clear that Bitcoin has been conceived as an ultra-hard type of money.
In 2024 (when the next halving is due to take place), its degree of hardness will inexorably increase even further, to a level unprecedented in human history (a stock-to-flow ratio of more than 100!). Nobody really knows what repercussions such a monetary standard would have.
Only one thing is clear: if Bitcoin is indeed to become the money of the 21st century, it will be because its properties (above all its high degree of hardness) have been preferred to those of alternative types of money – after all Bitcoin is a completely open monetary system operating on a purely voluntary basis.”
Bayern LB’s total assets reached $240.8 billion in 2018 and offers a wide range of financial services including loans, asset management, bond issuance and securities trading.
You can check out the full report from Bayern LB here.