- BTC’s stock-to-flow ratio will exceed that of gold in the coming year
- After next halving in 2024, its degree of hardness will be unprecedented in human history
Germany’s state-owned bank BayernLB has published a paper where it talks about Bitcoin and how it’s designed as an “ultra-hard type of money“. The bank opens with expectations for further extensive loosening measures and the USD 15 trillion bonds having a negative yield. This, in turn, is giving a lift to the oldest store of value in mankind, gold.
While gold has earned its high stock-to-flow ratio “the hard way” over the course of millennia, bitcoin’s has been purely based on its digital character that enables “supply engineering,”
“Bitcoin will probably already succeed in attaining a stock to-flow ratio similarly high to that of gold in the coming year,” that too just within 11 years. This “unusually strong” correlation emerges between the market value of the digital asset and the ratio between existing stockpiles of BTC and new supply.
The first time, this approach was used was by analyst PlanB as mentioned by the bank in its paper that says it is a “good heuristic for understanding Bitcoin.”
Bitcoin’s stock-to-flow ratio will rise at a “breakneck” pace
Bitcoin, the paper reads is designed as an ultra hard-type of money that will exhibit a similarly high degree of hardness as gold, next year, when halving will occur, which will further decrease the BTC flow.
As per this standard, the bank predicts BTC’s value around $90,000. This however, will be the “major acid test” that flagship cryptocurrency will have to face, the bank wrote. BTC’s supply engineering will further cause the stock-to-flow ratio to rise at a “breakneck” pace. By the time the next halving will take place in 2024, the bank says:
“its degree of hardness will inexorably increase even further, to a level unprecedented in human history,” more than 100.
If Bitcoin becomes the money of the 21st century, it will be because of its properties, and above all BTC’s degree of hardness is preferred to other money alternatives.
“After all Bitcoin is a completely open monetary system operating on a purely voluntary basis.”