This Predicts Bitcoin Price — and It’s Uncannily Accurate

Many investment advisors are beginning to recommend some exposure to Bitcoin (BTC) and some alternative (alt) coins, such as Ethereum (ETH).

But the biggest hurdle for many analysts is how to evaluate BTC’s value. There are many valuation models for stocks, bonds, and commodities, but when it comes to a digital asset/currency like BTC, it takes a model similar to one that measures commodity scarcity — stock-to-flow.

A popular Stock-to-Flow (S2F) model for BTC was created by an institutional investor who refers to himself as Plan B, Twitter handle @trillionUSD.

His S2F chart is shown below. It has been uncannily accurate in predicting Bitcoin’s future price.

stock-to-flow chart for Crypto blog article
Source: Plan B, @100trillion USD

The chart’s horizontal axis runs from 2010 through 2021 and the vertical axis is a log scale of price, which starts at $0.01 and runs up to $100,000.

The solid white line is the S2F model price, which has stair-stepped higher from less than a penny in 2009 to $100,000 in 2020-2021. Each stair step is a result of the halving events, including the one in May 2020.

The halving event is when the reward for mining BTC is reduced by half. The reward is paid to a miner when his or her computer has solved a mathematical problem that confirms a BTC transaction.

A halving event occurs approximately every four years, which programmatically reduces the number of new coins entering the market over time.

This is why BTC is considered the “anti-inflationary” currency as compared to fiat currencies, which global central banks create out of thin air. The next halving event will be in 2024 and the S2F model jumps to $1 million in 2025.

The colored dots on the chart are the actual monthly closing prices, and the colors of the dots show how many months until the next halving event (the color code bar is at the bottom of the chart).

The colors go from red, equating to more than 44 months until the next halving, to blue, equating to less than five months until the next halving.

Lag and spike

The actual price for BTC, as represented by the colored dots, has cycled around the white line during its climb higher. BTC’s price tends to lag the model’s price after each halving event and then tends to spike above the line after it “catches up” with the model’s price.

The actual value divided by the model’s value is shown with the white dots along the bottom of the chart. It cycles around $1.00 (fair value) and when it’s below $1.00, as it is after each halving event, investors have a wonderful buying opportunity.

When it climbs above $1 it’s a warning to new investors — there will be better buying opportunities ahead.

A lot of new investors, especially institutional buyers, began to invest in BTC in 2020. Each halving event provides investors with an outstanding opportunity to participate in an expected rapid increase in BTC’s price.

Just a small overshoot of the model’s price in 2021-2022 would mean BTC could hit $200,000.

It’s important to note that this model predicts where price will go but it’s certainly no guarantee. However, the model continues to suggest investors would do well to have a small percentage of their investment portfolio allocated to BTC and other cryptocurrencies.

If you’d like to learn more about cryptocurrencies, crypto exchanges and the state of the crypto market, sign up for a free trial of my weekly Crypto Wealth Protocol newsletter.

Recommended Articles

7 Warnings Signs of a Recession

The 2018 has not been a banner year for the stock market. Warning signs of a recession are becoming more obvious, according to some economists and market pundits. The Dow

Keeping More: How Does a Student Loan Affect Taxes?

Filling out your taxes correctly can be a challenging process, especially for those with student loans. But how does a student loan affect taxes? Many ways, starting with deductions. It

Migraine Pain? Here Are the Best and Worst Foods

Food can be your friend or your foe. Particularly for migraineurs, food can be a serious trigger for a headache, or it can bring a blessed relief from pain. Here

5 Major Money Decisions Before You Retire

It is said that retirement is a lifelong journey and not a destination. For many aspiring retirees, it may be a road to nowhere. Over 22% of Americans have less

Buying a Home? Avoid These 8 Killer Mistakes

Buying is home is not easy. You need to line up credit, decide how much house to buy, find the house, deal with realtors and the sellers. It can be

Body Odor: The Real Reasons Why You Stink

Body odor can be a really embarrassing condition. Unfortunately too many people deal with this common problem by washing more often with antibacterial soaps and body washes, and applying products

4 Powerful Passive Income Ideas That Can Boost Income

Do you enjoy exchanging hours for pay? This form of compensation is common, but most people dread it. What if you could instead get paid whether you work or not?

8 Tips for Efficiently Managing Your Small Business Finances

Managing your small business finances is crucial. Small to medium-sized businesses need financing but they lack enough of it — to the tune of $5 trillion, according to the SME Finance

The One Chart That Could Be a Game Changer for Investors

Allow me to present one chart to you that could indeed prove to be a game changer for investors and financial markets going forward. See below. What are we looking

6 Cultures That Promote Longer Lives and What We Can Learn From Them

Okinawa is renowned for its ability to produce long-living citizens and centenarians, or individuals who live past 100 years of age. What’s their secret? Their bodies age more slowly than

Seniors Finding Jobs in the Gig Economy Created by Millennials

A growing number of seniors finding jobs are doing so by joining the gig economy. According to a 2017 Prudential Financial survey, around 31 percent of gig economy workers are

Viagra for Women — Is a Pill Really the Best Answer for Igniting a Woman’s Sex Drive?

There is a new drug going up for FDA approval called Flibanserin. This medicine is being called “Viagra for women.” The FDA has already denied approval of this medication twice