Expectations that Bitcoin price would be a lot higher come from Plan B’s stock-to-flow model
Expectations for a strong Bitcoin price future reappear, and it comes mainly from Plan B’s stock-to-flow model. This is a valuation method based on the asset’s digital scarcity.
But will the Plan B’s stock-to-flow model still work on Bitcoin price?
$ 50k by May 2020 is a target that is generally heard throughout 2019. That price target caused Bitcoin to rise in mid-2019 to $ 14,000, giving rise to a belief that a new bull run is on.
But $ 14,000 has come and gone. After that, Bitcoin started plummeting below $ 4,000 on Black Thursday. Now, Bitcoin is back to re-testing last year’s high but has been unable to re-test its 2019 highs, nor its 2017 all-time high.
Is this a weakness, or the calm before the storm? One thing that only gives hope to crypto investors, however, is the effect of the asset halving – an impact that has yet to be fully reflected in the price action.
BTCUSD Monthly S2F Invalidation Level and Date Example Chart | Source: TradingView
It was the halving during past cycles that sent the asset’s price parabolic and to record highs. This time around, however, Bitcoin has at all reacted the same. There’s been no post-halving death spiral, no taking off like a rocket due to miners suddenly holding, and the price is nowhere close to the $ 50,000 by May target.
Some of the goals are still based on this model, which one analyst claims that if Bitcoin is not reached, it will prove that Plan B’s model was invalid and would not leave any controversy.
According to crypto analyst Bit Harington, there is a possible argument against Plan B’s S2F model and all its updates. Three distinct levels and dates are given for each of the three variations of the S2F model.
Example: If we are below 60K July 2021 the S2FX model is invalid.
Example: If we are below 40K January 2022 all three models are invalid.
And that’s it. If we break these lines/prices I stop believing in a certain S2F model. Period. This is what I believe.
— Bit Harington (@bitharington) September 9, 2020
The model has been adjusted to account for Satoshi’s coins, among other reasons. In the above chart, each invalidation level is apparent.
For the “OG” original S2F model to prove invalid, Bitcoin would need to trade below $ 20K in May 2021, below $ 30K in September 2021, or below $ 50K in January 2022.
The next nut to crack is the updated S2F model, matching the first date and level at $ 20K, but upping the ante to $ 40K in September 2021. That leaves a target of $ 80K in time for January 2022. Any trading below these prices will crush the expectations around these theories.
The S2FX model changed its invalidation target to $ 30,000 by May 2021, $ 90k by September 2021, and $ 200,000 or more by January 2022.
Even how fast Bitcoin is growing due to its scarcity, can it rise from $ 10,000 currently to $ 200,000 in less than two years? It was about the same time for Bitcoin to grow from $ 1,000 to $ 20,000, so it is not impossible.
However, if any of these prices are not reached, other theories, such as cycle stretching based on the applied curve, will become much more attractive and reliable. If that is the end, and the halving isn’t all of it, it may be far from the next cycle peak.
You can see the BTC price here.
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