Making The Case For A Bitcoin Price Prediction Of $100,000 BTC/USD Exchange Rate In 2020
Expert: Bitcoin Could Reach $100,000 In 2020
The crypto enthusiast took his optimism from a textbook indicator that measures abundance in commodity markets.
The material in question titled Stock-to-flow ratio measures the amount of asset available in stock with its annual production rate. Consequently, the ratio will tentatively look at the period it will take the stock to reach the flow.
Looking at the case of Gold, Dr. Hosp noted that it usually takes the precious metal 62 years to reach from stock to flow, which usually curbs its supply against high demand. Silver, on the other hand, will need approximately 22 years to complete a similar flow, the reason it is quite cheaper compared to Gold.
Looking at the same index, Bitcoin would need about 27 years to reach its total circulation of 17.7 million (stock)- at the rate of 657,000 per year. Although Bitcoin might reduce due to an event that would slash bitcoin’s supply from 12.5 BTC to 6.25 called halving. The Bitcoin annual flow would thus reduce to 328,500 BTC.
Dr. Hosp is therefore of the opinion that production is the most important element in determining the value of an asset. While taking a look at gold, the analyst stated that production is increased because the miners are optimistic of a very high return, which in turn increases the Stock-to-Flow ration for Gold.
Due to the expectant high returns, miners produce gold in excess, which leads to overproduction, and in-turn means supply exceeds available demand, and as a result, the price of the precious metal comes down, which makes production unattractive and push the stock-to-flow Ratio up.
Dr. Hosp also stated that it will take much for Bitcoin to match Gold’s Stock-to-Flow Ration of 62 years, but because there is stability in the production of Bitcoin, the only price could jerk up the ratio.
Applying the SF Multiple- a ration of Bitcoin price to its SF model price to understand the cryptocurrency’s tops and bottoms. The analyst realized that the indicator has a significant success rate, which stands at 95%, for it accurately called bitcoin’s overvaluation in 2011,2013 and also in 2017.
The indicator was also able to identify the cryptocurrency undervaluation during 2017 and also the summer of 2018. Dr. Hosp meanwhile noted at, at present, the SF Multiple Settled Bitcoin’s actual price is between $8,500 and $9,500.
In related news, market analysts and stakeholders in the crypto industry are deliberating on the reason for the surge in the price of Bitcoin. Bitcoin Exchange Guide reported earlier in the month that the CEO of Erisx Tom Chippas is of the opinion that the surge was caused by different reasons and stressed that the main reason was the sustained growth and development witnessed in the sector coupled with the influx of different stakeholders who are passionate about the cryptocurrency community.