For a while now, Bitcoin (BTC) has seemingly moved with rhyme nor reason. Today, the crypto asset is down 7%, falling off of no clear fundamental event. And just four days, it was rallying by over 10%, pushing ever closer to near its year-to-date high of $14,000.
Despite the day-to-day volatility, valuation models have begun to arise for Bitcoin, ones that may give insight into where this cryptocurrency can head in the long run.
According to a refreshed model by a leading statistician in this market, should BTC follow a model that it has for over seven years, it could see six digits in the coming two years.
The Road to a $1 Million Bitcoin (Legit bitcoin investment)
You might not know him, but Bitcoin analyst PlanB has a model that may shock cryptocurrency investors the world over.
Before we begin, let’s take a quick look at the definitions of the stock-to-flow ratio (SF) and its effect in financial markets.
The stock is the value of an asset, usually a commodity, above the ground/produced; the flow is the growth in the supply of said asset in any given year. These two sums can be combined to form a ratio, which defines scarcity by how much inflation an asset sees (the higher, the more scarce).
According to an analysis compiled by PlanB, the value of commodities like gold and silver can be plotted, and thus predicted, by a stock-to-flow valuation model.
In a recent tweet, the analyst noted that if you take BTC’s prices in all historical Octobers, then plotted it against the stock-to-flow model, Bitcoin fits it to a 99.5% R2.View image on Twitter
This is becoming scary: using Oct instead of Dec data, Stock-to-Flow model fit improves to 99.5% R2! Model error was mainly caused by Nov2013 and Dec2017 ATH, so sampling without ATH gives less noise. Predicted #bitcoin prices increase: $100K (2020+), $1M (2024+), $10M (2028+)…1,18012:42 PM – Jul 14, 2019424 people are talking about thisTwitter Ads info and privacy
The model predicts that should Bitcoin continue to follow the model to an eerie degree of accuracy, BTC could reach over $100,000 a pop after 2020’s halving event. You see, when the cryptocurrency’s block reward reduction arrives, the SF ratio naturally increases, doubling actually.
And as the relationship between the SF ratio and the market capitalization of a commodity is seemingly exponential in PlanB’s model, each halving should bring about a massive bout of growth for Bitcoin.
BTC May Shoot Higher in 2019: No Need to Wait for 2020?
While 2020 and beyond may seem a while away, analysts are suggesting that Bitcoin could be poised to push dramatically higher in 2019. Per previous reports
Timothy Peterson, a Texas-based crypto fund manager and Bitcoin pioneer, recently laid out the model below which plots how BTC’s performance in the first half of any given year relates to the second half’s performance.
Interestingly, the model, which can be defined as the positive slope y = 1.1409x + 0.5151, fits the trend to a 90% R2.
According to Peterson, Bitcoin gaining 180% year-to-date (effectively the 2019’s first half) implies that it has another 250% (“give or take”) left to run by the end of the year.
A 250% gain from current levels would mean Bitcoin ends the year at $40,000 — practically double BTC’s 2017 all-time high of just around $20,000. According to Peterson, even $50,000 is realistic.
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