Bitcoin is currently struggling to stay above $5,000, when just a couple weeks prior, the asset was trading above $10,000 – over double the current price.
But despite the latest fall, the asset’s highly-cited stock-to-flow model focusing on the asset’s hard-coded scarcity continues to hold. With the model still intact, it may now be time for crypto investors to hold for the long haul.
Bitcoin Bloodbath Can’t Disrupt Stock-t0-Flow Model
The first-ever cryptocurrency is having a majorly bad week.
As coronavirus concerns continue to mount, the world is in turmoil and markets are collapsing. Not even save haven assets like gold or silver are safe from the carnage.
Bitcoin and the rest of the crypto market were his especially hard, as the high risk, speculative asset class struggles with liquidity and by lacking fundamental value is more susceptible to investor sentiment.
That sentiment is in extreme fear after this week’s drop in combination with a global pandemic and possible recession.
Bitcoin fell from over $10,000 in February, to a low of $3,800 as of the time of this writing. And while the impact of the virus not slowing down and a vaccine still weeks if not months or even a year away, things may not turn around soon.
But regardless of the chaos and resulting selloff, Bitcoin continues to follow the stock-to-flow model.
The current price is well within the deviation range the model suggests.
1.5T dollars injected into the markets by fed.
Steady slow grind up for #Bitcoin over next 200 days.
Those that hold will be rewarded. S2F model held up. pic.twitter.com/En6afVCFwd
— Jason A. Williams 🦍 (@JWilliamsFstmed) March 13, 2020
Can The Halving Save Crypto From The Recession?
The stock-to-flow model uses a formula to derive potential price and value from Bitcoin, based on the asset’s limited supply.
Each Bitcoin halving cuts that supply in half, hence the name.
Because the supply is reduced, supply and demand balance is thrown off and in the past caused Bitcoin to explode in value.
While the same thing was expected again this May, when the next halving hits, the coronavirus is making things difficult.
However, if the stock-to-flow model continues to hold, it may be time for crypto investors to do so as well. The model puts Bitcoin valuations at over $55,000 shortly after May, simply based on the lowered supply alone.
Supply and demand dynamics may take over, it could cause the cryptocurrency to start its next bull run, even in the face of the greatest recession the world may ever witness.
Bitcoin was born from the last recession and was built to withstand future recessions. With the first one potentially here at the hands of a pandemic, it’s time for Bitcoin to prove itself and this stock-to-flow model to do so as well.
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