On June 20, with the price of bitcoin falling below $34,000, one analyst predicted that the cryptocurrency would rise to $13,000 by the end of August.
On August 31, the price of bitcoin closed at $47,156 – less than a third of what was predicted.
The predictor, a pseudonymous Dutch analyst named PlanB, has become famous for the “astonishing” accuracy of his stock-to-flow (S2F) model, which is based on bitcoin’s inherent scarcity.
Follow all the latest crypto market updates with The Granthshala’s Bitcoin Live Blog
S2F works by dividing an asset’s current supply (stock) by its annual output (flow), which for bitcoin halves roughly every four years. These four-year cycles of boom and bust come with price rallies and corrections, with new peaks being hit approximately 12 to 18 months after each halving event. The most recent halving took place in May 2020, with Bitcoin setting a new record just 11 months later – but according to the S2F model, this was the first leg of the rally.
According to PlanB’s “worst-case scenario,” bitcoin will return to its all-time high of $64,000 by October, before reaching $98,000 in November and $135,000 in December.
The simplicity of the model means that it can certainly be knocked out by a number of external factors, as demonstrated when bitcoin fell from $64,000 to below $30,000 between April and June. The correction comes amid a disastrous mining crackdown in China and Tesla’s announcement to reverse its decision to accept bitcoin.
Inspired by positive news on El Salvador’s move to legalize bitcoin legal tender, a massive rally saw the cryptocurrency back above $50,000 and back in line with the S2F model.
PlanB said, “All these predictions can be destroyed by the Black Swan event, such as the bitcoin ban, the Covid escalation, the war with China, etc.” Granthshala.
“ETF approval or El Salvador success spread or favorable legislation could be the trigger event for the next phase. And of course, a complete lack of sellers at one point – in my opinion we are getting to that point in a few months “
There is more than one version of the S2F model, including First published in March 2019 – When the price of bitcoin was below $4,000 – prediction of a peak of $55,000.
a Revised edition, released in April 2020, kept bitcoin on track for $288,000 in this cycle. By the time the next cycle comes in 2024, bitcoin will be on a path to $1.1 million.
PlanB’s forecasts continue to feel “like clockwork”, giving them more than 700,000 followers on Twitter. However, the S2F model is not short of opponents.
Vitalik Buterin, who founded Bitcoin’s closest rival in terms of market cap, described The S2F model as an “infallible” theory, while lead fund manager Nico Cordeiro dismissed it as “mere maths marketing.”
Both of these comments were made last June, when bitcoin struggled to break above $10,000.
Bitcoin’s notorious volatility means it’s sudden crash isn’t more than one bad news, but PlanB remains bullish and urges people to take a longer-term view of the cryptocurrency’s market movements.
“Anybody who didn’t buy bitcoin and [held] Lost money for more than four years,” he said. “sometimes.”
Credit: www.independent.co.uk /