America’s oldest bank BNY Mellon has compared Bitcoin to gold, and cited the controversial stock-to-flow (S2F) model that puts a $288,000 price tag on BTC in 2021.
In a new evaluation report that has since been taken down, the historic bank says that the flagship cryptocurrency’s supply and demand dynamics mirror that of the yellow metal.
“So far, it appears Bitcoin aligns nicely with gold in terms of both supply and demand. With this in mind, we will use gold as a starting point to discuss potential valuation methods for Bitcoin.”
The banking behemoth goes on to cite the S2F model that is traditionally used for precious metals, but recently applied to Bitcoin by the pseudonymous trader PlanB. The S2F compares the amount of a commodity in circulation divided by the amount produced every year.
“The implication from this model is that as Bitcoin gains more mainstream momentum and is viewed more like gold, the scarcity value (as measured by S2F) and the subsequent halving will ultimately drive prices to the gold dot cluster and implied total market value.”
Since Bitcoin has a lower S2F ratio, the model suggests that BTC could eventually overtake gold’s market cap.
“Commodities such as gold have the largest S2F ratios (over 50), meaning it would take over 50 years of gold production to get the current gold stock. Bitcoin has a current S2F ratio in the 20s. Common S2F linear models extrapolate a price based on the increasing Bitcoin S2F ratio (from halving) to eventually reach gold’s market cap.”
However, BNY Mellon’s analysts highlight that the stock-to-flow model could be flawed.
The day after the posting of the BNY Mellon report, PlanB asserted that he remains confident in the S2F model.
“My confidence in 2019 published S2F model and 2020 S2FX model is high. It is based on S2F(X) performance & track record. And also on confirmation by my other (unpublished) on-chain model. This model counts specific transactions and recognizes bull/bear markets (green started Dec).”
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