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Bitcoin S2F Model and Its Forecasting Power


Posted: Tuesday, November 24th, 2020

Estimated Reading Time: 2 minutes

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Bitcoin S2F model was published for the first time in March 2019. The S2F stands for “Stock to Flow,” and it represents one of the reasons why Bitcoin bulls keep holding to their cryptocurrencies.

The model predicts Bitcoin will reach $288,000 by 2021. More precisely, the model predicts the value of Bitcoin to be a minimum $100,000 by the end of 2021.

Considering that we are almost in December 2020, and Bitcoin trades close to $20,000, who would not be tempted by a 500% minimum ROI in twelve months?

Bitcoin S2F Model

Bitcoin to $100,000 By December 2021 According to Bitcoin S2F Model

Bitcoin S2F model sparked a lot of controversies so far. Yet, it stands the test of time. No one can argue with the recent Bitcoin price action. After all, it doubled in the last thirty days or so. It now trades above $19,000 at the time of this writing, jumping from $10,500 at the start of October.

Yet, this represents one of the major critics against Bitcoin. Is Bitcoin money? If yes, its extreme volatility keeps institutional investors away.

People have no problem participating on the upside. Or when Bitcoin rallies. However, we should all remember that Bitcoin lost 60% of its value in 2020 at the helm of the pandemic – something other assets did not witness.

In other words, while the Bitcoin S2F model might be right, such a drawdown followed by an extreme rally is not something that institutional investors tolerate.

As a counterargument, who needs institutional investors when PayPal buys almost 70% of all Bitcoins mined today? Credited with igniting the recent bullish move, PayPal announced that it would accept crypto payments on its online payments platform.

Bitcoin at $19,000 – Bubble or Just the Start of an Incredible Rally?

In March this year, financial markets reacted to the lack of USD in the system. As such, stocks collapsed, and so did Bitcoin and gold.

The two, Bitcoin and gold, bounced together with the U.S. stock market. The two were viewed as offering a hedge against inflation – as alternative investments do.

However, something changed in the last month or so. While the price of gold corrects and maybe even started a bearish trend, Bitcoin keeps rising.

The volatility mentioned earlier might explain the divergent move. As Bitcoin dived 60% in March 2020, gold did not. Now, Bitcoin experiences a similar deviation from gold – only this time to the upside.

Therefore, Bitcoin may even make a new all-time high in November. In fact, it may have even posted one by the time this article is written.

If the gold and Bitcoin correlation holds, as explained in this article, then the Bitcoin S2F model has a problem. Yet, because it allows for such a huge drawdown, the model may still be around long enough to check the accuracy of its predictions.

After all, December 2021 is just around the corner.

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