When Will Bitcoin go to $100.000?
Bitcoin is over 40% of its all-time high of $68 000. The cryptocurrency is officially in a bear market. Does the future outlook look bright?
The stock-to-flow model
The stock-to-flow model is a model used to predict the future price and the scarcity of a resource. To calculate it, take the number of resources held in reserve and divide it by the annual production of the resource.
The model is often used on gold. According to the World Gold Council, there is a global proven reserve of 190 000 tons of gold. The annual production varies from 2500 tons to 3500 tons. If we divide 190 000 by 3500, we get 54. What does this mean? This suggests that it would take 54 years in order to double the total supply of gold. The higher the number is, the more scarce the resource is.
With bitcoin, the total supply is limited to 21 million coins. Currently, 0,7 million coins are mined per year. This gives it a stock to flow of 25. But every 4 years, the miners rewards are cut in half. This process is called the bitcoin halving. The last halving were in 2012, 2016, and 2020. In 2016 the first major rally began which ended in late 2017, the same happened in 2020. The next halvings will be in 2024 and 2028.
The model has closely predicted the value of bitcoin in the past decade. The model implies that by 2028, the price of bitcoin should be around $1 000 000. This would represent a 2500% upside.
While the model is a great long-term indicator, it doesn’t take politics, the economy, or regulations into consideration because we are looking so far into the future.
Because the next halving is so long into the future, bitcoin experts are worried about a crypto winter. A crypto winter can be defined as a substantial drop in all cryptocurrency prices without it recovering for a long period of time. The last crypto winter was from 2018 to 2020, when the price almost didn’t move.
Final Thoughts
If you believe in bitcoin over the long term, it’s best to dollar cost average. Crypto winters are great times to grow your portfolio while the price is still relatively low. For the short-term investors, I would look closely at the charts and dive even deeper into this.
Disclaimer: I am not a financial advisor. Do your own research before making a financial decision.
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