A German bank with a government background has predicted the price of bitcoin. It is expected that the price of bitcoin will be halved in May 2020 and will reach $90,000.
The research paper mentions the Baicoin Standard author Saifedean Ammous, the German bank Bayern LB said that halving will reduce the amount of bitcoin output, from 12.5 bitcoins per block to 6.25, which will highlight scarcity Characteristics such as sex – this is why gold has remained high for the past few thousand years.
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The value of scarcity can be calculated by dividing the number of bitcoins currently in circulation (ie, "stock") by the bitcoin's rate of output (ie, "flow"). The theory holds that the higher the "stock-flow" index, the more "hard" the currency is. Manuel Andersch, senior foreign exchange analyst at Bayern LB, believes that the stock-to-flow ratio of assets is a way to quantify the "hardness" of an asset. Andersch said:
“Historically, at that moment, it (gold) was always the commodity with the highest ratio of stocks to flows, and it has been used as currency, because it allows for optimal value transfer over time.”
This is because, compared to supply, assets with lower yields are less exposed to inflation risks. The situation in Bitcoin is unique because it prevents programming from increasing its supply. Andersch wrote:
“Given Bitcoin has no other use at all, any other development in demand will not affect its price structure.”
The bank concluded that by the time it was halved, Bitcoin’s “stock-flow” index would rise from 25.8 to around 53. After that, "there will be a sky-high price of about $90,000."
But Bitcoin is in a downtrend and has fallen to $8,300 this week. How can it achieve such a large increase in a short period of time? The bank said that Bitcoin does not rely on the efficient market theory of the cryptocurrency market, which believes that known future events have been reflected in existing price performance. Conversely, for Bitcoin, more will generate revenue when the relevant event occurs.
"If we put the bitcoin stock-to-flow ratio in May 2020 into the model, there will be an astonishing price of $90,000. This would mean that the upcoming halving effect is hard to reflect in the current price of about $8,000."
However, the bank admits that “even the best statistical model may be a fiasco when trying to predict the future.” This failure is not the first time: many people think that the halving of the Litecoin this year will usher in a price hike. However, the truth is quite the opposite. The price of Litecoin only rose before it was halved, and then fell sharply.
Despite this, Bayern LB's conclusions show that bitcoin is in a unique position when prices rise. Andersch wrote:
“By 2024 (half the next halving), its hardness will inevitably increase further, reaching an unprecedented level in human history (the ratio of stock to flow exceeds 100!).”
“No one really knows what effect this currency standard will have. We only know that if Bitcoin does become a 21st century currency, it will be because its property is the preferred alternative currency, after all, Bitcoin is a completely open currency. The system operates on a purely spontaneous basis."