Because Bitcoin is a new, emerging technology unlike anything before it, it is difficult to give the speculative asset a meaningful value, and instead, market dynamics like supply and demand take over.
One attempt to assign a fair market value to Bitcoin has been done through a highly-cited stock-to-flow model. However, Bitcoin price is now trading between 15 and 20 percent below the projected stock-to-flow value of the asset, suggesting that the asset is currently undervalued and that it is “time to pay attention.”
Time to Buy BTC? Bitcoin Falls 20% Below Stock-to-Flow
Bitcoin price throughout 2019 had been following along the highly-cited stock-to-flow model, popularized by crypto analyst Plan B. The model has been referred to on CNBC Fast Money a number of times, and has been considered among the first accurate way of providing a meaningful measure of Bitcoin’s value based on its supply.
According to the stock-to-flow model, Bitcoin should be on track to reach roughly $55,000 per BTC by its halving this coming May 2020. Starting in 2019, Bitcoin appeared to be well on its way to such figures, rallying over 350% from trough to peak, before it was rejected at $14,000.
Currently, Bitcoin is trading around $7,000 – roughly 50% of the peak value it reached in 2019, but also a far cry away from the $55,000 it is projected to reach this May – a mere six months away at this point.
Bitcoin's Stock to flow model.
Currently below s/f by 15-20%
— f i l ₿ f i l ₿ (@filbfilb) November 27, 2019
Based on the model, one analyst points out that Bitcoin is now trading between 15 and 20% below the projected price of the model, and suggests it is now time to pay attention to leading cryptocurrency by market cap, as it may return on its bull run and continue along its path to $55,000 by halving.
Reaching $55,000 from current prices would represent an over 630% gain. Such gains are impossible in the majority of asset types, but this is Bitcoin we’re talking about, and anything is possible. The crypto asset in just three months from April to June went from $4,000 to $14,000, resulting in an over 300% gain. If it achieved half of that gain in just 3 months, a full 600% gain in six months isn’t out of the question.
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Reaching such a number would likely cause extreme FOMO, taking the asset to the lofty prices that some investors firmly believe Bitcoin will someday reach – prices of as much as $100,000 to $1 million per BTC. But first, Bitcoin needs to breach $14,000, then take out its former all-time high at $20,000 – two important feats – before a run at $55,000 is possible.
At the very least, if the stock-to-flow model is at all accurate, buying Bitcoin now could be among the most rewarding investments of a lifetime.
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