A prediction that Bitcoin (BTC) is about to begin a fourth parabolic phase that will bring the leading cryptocurrency to more than a quarter-million dollars is lighting up the cryptoverse.
A post revealing the new forecast from price analyst PlanB shot across crypto Twitter this week, with more than 4,200 likes at the time of publishing.
But the forecast itself has reignited the great debate on the relationship between Bitcoin’s halving – which will slash the rate of new BTC entering the market in a matter of days – and the price of BTC.
According to PlanB, who recently told Morgan Creek Digital co-founder Anthony Pompliano that he’s a member of an institutional investment team that manages roughly $100 billion in assets, his latest stock-to-flow model shows BTC rising to $288,000 by the end of 2024.
The forecast analyzes Bitcoin’s scarcity by removing time and grouping Bitcoin’s growth in phases representing its transition from a proof-of-concept to a potential payment method, to a store of value, and then a financial asset.
PlanB says the relationship between Bitcoin’s price and its scarcity, determined by dividing the overall supply by its yearly production, are cointegrated. The term implies the relationship is especially solid, as if the ratio and price are tethered to one another.
Macro investor Raoul Pal says the new model, which PlanB designed to also evaluate gold and silver, offers a powerful method of analysis.
“This is what I saw in [PlanB’s] model when he first revealed it. It gives a great valuation for not only bitcoin but gold and silver too (and other similar assets). It’s super powerful for relative valuations and outright valuations for all these assets. Amazing work.”
However, the forecast is also earning plenty of detractors, including economist Alex Krüger. He says the fact that Bitcoin’s scarcity is locked in and not random fundamentally destroys the predictive power of the model.
“Bitcoin’s Stock to Flow and Price are NOT cointegrated. Therefore the Stock to Flow model has no predictive power. Stock to Flow cannot be used to predict price. Stock to Flow and Price are not cointegrated because Stock to Flow is not a unit root process, i.e. not random…
[Bitcoin’s Supply] is determined by an algo. Not randomly. Controlled Supply is the whole point about Bitcoin…
Please note this is not subject to interpretation. This is not about ‘all models are wrong, but some are useful.’ The S2F analysis is interesting. But the S2F model is useless for predicting price, as the underlying assumptions of the model are not met. Now and always.”
Another longtime criticism of Bitcoin’s stock-to-flow chart is that it’s based on a small number of data points, with Bitcoin going through just two prior halvings in its short history.
Since those halvings, Bitcoin has also become increasingly institutionalized, leading Coinshares chief strategy officer Meltem Demirors to argue that the rise of futures from the likes of CME has fundamentally made Bitcoin’s future price far less predictable.