Much of the crypto market was taken from when bitcoin soared 53% in October and hit a new all-time high of $66,930, but those following PlanB ( @100trillionusd ) and its price forecasts were already expecting the new record.
He is the creator of the stock-to-flow (S2F) model that tries to project the price of bitcoin using as its main basis the scarcity of the currency in relation to its production time. Although in practice it is impossible to predict how much bitcoin will be worth tomorrow, next week or 10 years from now, the model has shown its efficiency.
In the last three months, PlanB's price analyzes based on stock-to-flow were accurate. In August, bitcoin was targeting US$47,000, would drop to US$43,000 in September and then rise again to $63,000 in October, and that's what happened.
Bitcoin price targets for the coming months have also been established by PlanB: bitcoin should reach US$ 98,000 in November and US$ 135,000 in December.
How stock-to-flow works
The main logic behind stock-to-flow is that if bitcoin has a fixed supply of 21 million tokens and if its production halves every four years while demand continues to grow, prices can only go to one. direction, and it's up.
The model is based exclusively on the currency scarcity rate, a ratio obtained when the total asset stock (21 million) is divided by the annual production of BTC through mining. In general, the metric should indicate how scarce an asset is in relation to production time, something similar to what is already used in the gold and silver market.
According to cryptocurrency analyst Marcel Pechman, the model fails to be based solely on the scarcity of cryptocurrency. “Scarcity does not define the price of anything. There are more Monet paintings than Charles Angrand. Why is Monet more valued?”, he compares.
The problem is that stock-to-flow ignores external events and their impact on bitcoin price. In other words, the model could not predict that bitcoin would fall after suffering the Chinese government's crackdown in May, or that it would rise in October thanks to the approval of a US bitcoin futures ETF.
In Pechman's view, these market events must be taken into account when thinking about the future of the cryptocurrency price. “Now it's in the hands of the ETF, which the market has said for so many years that it would be 'the vehicle' of choice for institutional clients. If the ETF reaches 4 or 5 billion dollars by the end of the year, it is possible for the price of bitcoin to rise to more than US$ 135,000”, he concludes.
The trajectory of stock-to-flow over the years
The stock-to-flow model was developed in January 2019 by 'PlanB'. Although little is known about the identity or personal life of those behind the pseudonym, he has already revealed that he is a former institutional investor in the Netherlands with 25 years of experience in the financial market.
The metric created by him can be followed through the look into bitcoin website. The graph shows two main lines. The first (red) line is the price that bitcoin is expected to reach in the future and the second (colored) shows the real price of the cryptocurrency.
The colored scale of the metric is a kind of “temperature” that indicates the distance to the next bitcoin halving, with red being very close and blue being very far away. As the last bitcoin halving took place last year, cryptocurrency is currently in the green.
As you can see on the chart itself, although bitcoin price has followed the upward movement of the stock-to-flow model, it has not always risen at the same pace as expected.
“The model was correct 5 months of the last 4 years, therefore 10% correct. He can't predict the pace of adoption, so for a few years he was more than 50% off in the quote, which to me means he was wrong: both in the $20,000 bubble in 2017, and in the $20 depression 3,500 in 2019,” explains Pechman.
In July, PlanB itself recognized the distance of its model with the real price of bitcoin. At that time, he said that “the next 6 months will be all or nothing for stock-to-flow”.
Since then, it's just been hits. It remains to be seen whether bitcoin will have the strength to double its price and close 2022 at more than US$ 135,000 as PlanB predicts.
The post Who is the trader who hit the Bitcoin price in the last three months and what the forecast for the end of the year appeared first in Portal do Bitcoin .