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Bitcoin Shows Ideal Set Up For Epic Rally: Stock-to-Flow and Oversold RSI

Tony Spilotro by Tony Spilotro
2 years ago
in Bitcoin, Cryptocurrency news
Reading Time: 2 mins read
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Bitcoin price is in recovery mode, after the first-ever cryptocurrency suffered a record-breaking collapse and fall to under $4,000, shocking the crypto community and the world at large.

The selloff has led to extremely oversold conditions, according to the Relative Strength Index indicator. When combined with a Bitcoin valuation substantially below where the highly cited stock-to-flow model predicts, its the ideal setup for an epic rally, according to the theory’s creator.

Understanding Bitcoin’s Stock-to-Flow Model

Because Bitcoin is the first of its kind, and its use case has yet to be proven or implemented at speed or scale worthy of its potential, it is difficult to give the asset a proper valuation, and instead, price discovery is left to the constant tug of war between buyers and sellers.

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However, few analysts have attempted to perform fundamental analysis on the crypto asset by looking at the asset’s hard-coded digital scarcity, rather than financial figures and manufacturing reports common across stocks.

Related Reading | Bitcoin Price Weekly Closes As Shooting Star Doji, Epic Plunge May Follow 

One such model exists, called the stock-to-flow model, and it’s among the most popular and highly cited across the industry, even being the focus of discussion on episodes of CNBC’s Squawk Box.

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The stock-to-flow model suggests that due to the upcoming halving that sees the BTC reward miners receive for validating each Bitcoin block slashed in half, it should immediately cause the fair price of Bitcoin to rise exponentially due to the rise in relative scarcity.

Crypto Meme: Can Oversold RSI Ahead of Halving Could Lead to an Epic Rally

However, Bitcoin‘s halving thus far has been nothing but a “meme” at which the crypto community can poke fun of. Jokes about how the halving has done nothing but cut the price of the asset in half, rather than inciting a new bull run, are commonplace.

But when the stock-to-flow model is combined with an oversold Relative Strength Index due to Bitcoin’s record-breaking collapse last month due to the coronavirus chaos, it would be the perfect setup for an epic rally.

#Bitcoin Stock-to-Flow (S2F) & Relative Strength Index (RSI) .. great setup: halving in 28 days and oversold pic.twitter.com/mRg6RORIza

— PlanB ? (@100trillionUSD) April 14, 2020

When the RSI reaches oversold conditions, assets typically bounce or reverse. A touch of the lowest point of the RSI also often signals a bottom is in.

Related Reading | Crypto Market Cycle: Data Shows Bitcoin On Pace For Post-Halving Bull Run 

With a bottom potentially behind us, RSI reaching oversold levels, and a grossly undervalued Bitcoin according to the stock-to-flow model, the recipe for the greatest bull run ever is here.

Especially when combining the coming hyperinflation expected due to the recession and the government’s response to stimulate growth devaluing fiat currencies, Bitcoin could reach valuations of $100,000 or more, as many analysts are predicting.

Featured image from Pixabay

 

Tags: bitcoinbtcusdcryptohalvingS2Fstock to flow
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.

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