Will Bitcoin Cross $ 100,000 This Year? Key clue suggests BTC is at a crossroads
- Bitcoin’s price gains show the largest divergence on record after January 2019, from the stock-to-flow (S2F) pattern.
- The next six months will make or break the S2F model.
- Plan B is open to the possibility of it being invalidated, revealing a key BTC price point for August.
Bitcoin’s price has deviated more than 50% from the S2F model’s forecast, and its creator admitted that he was uncomfortable with it. Plan B has suggested that the bull run is just paused and that the price of Bitcoin will exceed $ 47,000 by the end of August. This new prediction is a decisive point for the S2F model.
S2F model faces serious bear calls as Bitcoin trades below target
Based on two halves of Bitcoin and nearly eight years of historical price data, independent Bitcoin analyst Plan B created the S2F model. The price of Bitcoin has mapped the model’s projections with near accuracy and some deviations since its inception. But after the recent divergence between the BTC price and the stock-flow model, analysts are concerned about the validity of this on-chain metric.
The S2F ratio measures the supply of Bitcoin that has entered the market relative to its total supply. A higher S2F ratio indicates that an asset retains its value over the long term. This model generally applies to natural resources, but Bitcoin’s scarcity inspired Plan B to use this model to predict its price.
Experts have argued that several events have an impact on the price of an asset, and that scarcity is not the only one. However, Plan B overlooked externalities when predicting the price of Bitcoin.
The analyst expressed unease with the cryptocurrency’s flagship price diverging from his projections and wondered if that would invalidate the stock-to-flow model.
Responding to Plan B, Preston Pysh, Founder of Buffetsbooks.com and famous YouTube finance educator, said:
You mean your model is no more than 40% of mining rigs banned and forced to shut down and move to various parts of the world … and without notice to companies / rights for extraordinary expenses to their heavily treasury bills / retained earnings in BTC.
Importantly, Pysh argued in November 2020 that if the network hash fluctuated over time, the S2F model would not work. The biggest negative adjustment for mining difficulty in Bitcoin’s history agrees with Pysh’s argument, and it may have sparked the recent divergence between other external factors.
Pysh had shared his thoughts on the validity of the S2F model with his followers via his Twitter. thread back in 2020.
Plan B followers have become less enthusiastic about the likelihood that the price of Bitcoin will hit the $ 100,000 target this year. The analyst conducted a Twitter poll and confirmed that the number of traders who believe Bitcoin will stay below $ 100,000 this year has increased by 25% since March 2021.
Bitcoin bull market is not over yet, model variance is getting closer
Plan B offered the best and worst scenarios for Bitcoin. Even though the pioneer cryptocurrency has fallen more than 50% since mid-April, the leading analyst believes the bull market is not over yet. He argued that $ 64,000 was not the peak and his bottom indicator indicates that the price of Bitcoin will return above $ 47,000 by the end of August.
Coming from the creator of the S2F model, $ 47,000 is now a key price target for Bitcoin. If it does not reach that level by then, the S2F model will likely be labeled invalid by the crypto community.
Plan B has never shied away from admitting that the model may be invalid, and fellow Bitcoin and YouTuber analyst Carl Martin shares his optimistic outlook.
Update of the Stock-to-Flow model:
The variance of the model reaches the red line (red arrows)
The price has never fallen below.
At the height of the bull cycle, the pattern’s variance was always exaggerated upward, now it isn’t.
– The Moon (@TheMoonCarl) July 14, 2021
The new forecast of $ 47,000 by the end of August is now the turning point for Bitcoin’s $ 100,000 year-end goal. This price objective will become crucial in determining the validity of the stock-flow model.