One particular pricing model, which has gained popularity over the years after accurately predicting the price of Bitcoin, estimates that the flagship cryptocurrency is going to go ballistic after the upcoming halving.
Bitcoin’s stock-to-flow model
In early 2019, a prominent figure within the cryptocurrency community known as Plan B published an article entitled “Modelling Bitcoin’s Value with Scarcity.” There, the analyst explained that Bitcoin’s scarcity — the ratio between its above-ground supply and yearly inflation rate — is highly correlated with the value of the network.
Under this premise, Plan B came up with a mathematical model dubbed “stock-to-flow” to estimate the future price of BTC based on its rate of issuance.
At the moment, roughly 657,000 new BTC are mined per year. But, this rate is set to drop to 328,500 new BTC per annum after the upcoming block rewards reduction event.
The significant cut in the number of Bitcoin that can be minted is expected to have serious implications in its price.
A new all-time high on the horizon
Indeed, Plan B maintains that after every halving, Bitcoin’s stock-to-flow doubles and the projected market value increases by 10x.
The renowned analyst said:
“The [stock-to-flow] model predicts a Bitcoin market value of $1 trillion after the next halving in May 2020, which translates into a Bitcoin price of $55,000.”
Along the same lines, CryptoWatch recently stated in a blog post that given the current economic climate of bailouts and infinite quantitative easing Plan B’s “trillion-dollar asset valuation may happen even sooner.”
The premium trading terminal provider argued that based on the stock-to-flow model Bitcoin could revisit its all-time high levels by the end of this year.
“[Considering the] 5% lost coins, Bitcoin should reclaim a $10,000 valuation by mid-July 2020, with price then ascending back to all-time-highs of $20,000 by November of this year.”
These bullish views align with the forecast that Erik Voorhees, CEO of ShapeShift, has about the pioneer cryptocurrency. The early tech evangelist suggested during the first-ever BlockDown remote crypto conference that the upcoming halving will be the catalyst that pushes Bitcoin to new all-time highs.
Despite the optimism, investors remain extremely fearful about what the future holds. The havoc that coronavirus has caused in the global financial markets is certainly a reason to be concerned as the unemployment rate skyrockets and oil prices plummet.
Nonetheless, Tone Vays, a former Wall Street trader and VP at JP Morgan Chase, has repeatedly stated that economic crises have demonstrated to be beneficial for Bitcoin. According to the technical analyst, the current economic environment is what has made the flagship cryptocurrency so resilient in the past.
Now, it is just a matter of time to determine whether or not Bitcoin will be able to emerge as a safe haven asset and reach the upside potential given by the stock-to-flow model.
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