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Analysis News

Bitcoin (BTC) competes with gold according to the stock-to-flow metric

Bitcoin is compared with gold and is titled “digital gold.” Now this is not just a beautiful metaphor. Financiers make convincing arguments and use the method of gold price forecast in relation to bitcoin.

A popular metric for precious metals is Stock-to-Flow ratio, or S2F. It is often used to predict the future price of precious metals. It is the result of dividing stored reserves by annual production.

One of the largest German banks, BayernLB, conducted an analysis and found that the same metric has been successfully applied to bitcoin. The bank report, in particular, stated:

– What is certain is that Bitcoin’s stock-to-flow ratio will increase drastically in May 2020 – i.e. after the next halving – from around 25.8 at the moment to almost 53. By contrast, gold’s stock-to-flow ratio (currently in the vicinity of 58) will only be insignificantly (if at all) higher next May. If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges.

The report notes that bitcoin total supply limited by 21 M makes BTC “ultra-hard currency” (Bitcoin’s digitally capped supply of 21 million coins makes it an “ultra-hard” type of money).

Forecast:Next year, it will already exhibit a similarly high degree of hardness as gold. In 2024 (when halving is set to take place again), Bitcoin’s degree of hardness will again increase massively.

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