The popular but controversial stock-to-flow (S2F) model now indicates Bitcoin could hit $70,000 by mid-2021, according to two analysts at Weiss Crypto Ratings.
The S2F model compares the amount of commodity in circulation divided by the amount produced every year. The model is traditionally used to analyze the intrinsic value of precious metals such as gold and silver.
“Although based on a different methodology than the one used by the Weiss Cryptocurrency cycles model, it is widely respected in the crypto world. And it now points to a ferocious rally over the next 12 months or so.”
Gold currently has an S2F of 62 – meaning it would take 62 years of current production to match global above-ground holdings, according to Weiss analysts Bruce Ng and Juan M. Villaverde. Silver comes in at 22, while Bitcoin’s S2F score is 56, meaning BTC may be poised to rival gold as a safe-haven investment.
Ng and Villaverde say macro economic factors also favor BTC. Their reasoning? The United States Federal Reserve “has turned on the monetary fire hoses,” printing $2.9 trillion in new paper money in the past 13 weeks.
“By any measure, this is corruption of money on an industrial scale. Historically, investors pour into gold as a safe haven when they lose confidence in paper money. This time, they’re going to pour into Bitcoin as well. And indeed, both are already on the rise. However, Bitcoin’s been going up faster, outperforming gold since the pandemic panic hit. And this is just the beginning.”
The analysts also point to blossoming institutional inflows into Bitcoin. Hedge fund giant Paul Tudor Jones invested $210 million of his own money in BTC. Grayscale Bitcoin Trust continues to purchase Bitcoin at a rate faster than it’s being minted. And venture capitalist Andreessen Horowitz recently launched a new $515 million fund to invest in crypto networks and businesses.
Say Ng and Villaverde,
“Long-term investors should look for weakness in this crypto asset for entry points and hold on tight. The long-term outlook could scarcely look more exciting.”