The first crypto analyst to apply the stock-to-flow ratio to Bitcoin says he believes BTC is on track to hit $100,000 by 2021.
The anonymous analyst, known in the industry as PlanB, just updated his predictions on Bitcoin’s price action over the next two years. He says the stock-to-flow model is on point, with Bitcoin poised to start a significant long-term bull run after the halving in May of this year.
According to PlanB, the model indicates BTC will not drop below $6,000. If it does, all bets are off.
Stock-to-flow is designed to indicate how an asset’s price relates to its scarcity. It charts the amount of an asset in circulation divided by the amount produced per year and is typically used to track the price of precious metals. Bitcoin has a fixed total supply of 21 million coins and halvings slice the amount of new supply entering the market approximately every four years.
Stock-to-Flow Skeptics Say Nay
Despite the halving hype, a number of skeptics say stock-to-flow is not a reliable way to predict the future price of Bitcoin.
Bloomberg Markets editor Joe Weisenthal says the fact that everyone knows the mechanics of Bitcoin’s supply far in advance means halvings are essentially already priced in.
“In May of 2020, the volume of new Bitcoin creation will be cut in half, and the theory (hope?) is that with the diminished supply, the price will shoot up. You know, supply and demand and all that.
Of course anyone who believes in even the weakest version of efficient markets would think this is nonsense. Markets move on surprises and unknown events, whereas the Bitcoin supply schedule is transparent for the world to see.”
Meltem Demirors, the chief strategy officer at the digital asset manager CoinShares, says the institutionalization and rise of BTC derivatives could also reduce the impact Bitcoin’s dwindling supply has on its price.
“There is a very real possibility the price of Bitcoin does not go up after halving. For the first time, there is a robust derivatives (futures, options) market for Bitcoin. Most firms looking to speculate on Bitcoin will trade a derivative, not the underlying…
The more Bitcoin becomes an investable asset, the more its price becomes decoupled from its value and its supply and demand. It becomes yet another backwater in the great game of global speculation. It becomes ‘financialized.’ It becomes correlated to macro markets.”
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