Bitcoin’s Model Value Based on Fed and ECB Balance Sheets Is More Than $500,000
The Bitcoin (BTC) price is moving around $19,000 for a while as everyone is excited about the next move. Global investors and institutions have shown willingness to enter into Bitcoin, in recent times. The health of the global economy seems concerning, as central banks are pumping massive stimulus money into the system.
PlanB, the popular crypto analyst and the author of the stock-to-flow (S2F) model, shows an interesting comparison between central bank balance sheets and BTC price movement over the last 10 years. Before 2020, the chart shows that the central bank money printing and the BTC goes hand-in-hand.
However, the equation has changed drastically this year as there have been trillions-of-dollars flushed into the global economy by central banks worldwide, as part of the COVID-19 stimulus packages. Interestingly, based on the current balance sheets of the Federal Reserve and the European Central Bank (ECB), the BTC price stands anywhere close to half-a-million dollars.
#bitcoin and central bank balance sheets (money ‘printing’) have gone hand in hand last 10 years .. but now BTC is lagging behind .. about two orders of magnitude (100X). Room for growth? pic.twitter.com/zAXN93qlTJ
— PlanB (@100trillionUSD) December 6, 2020
It clearly means that Bitcoin has the potential to explode by 25x from the current levels. Note that $500,000 is exactly the price required for BTC to move past Gold’s existing market cap of $9 trillion. As per PlanB’s Stock-to-Flow- model, Bitcoin can easily achieve this milestone in the period between 2021-2024. He further adds that Bitcoin can approach the real estate market value between 2024-2028.
#bitcoin stock-to-flow cross asset model
-if BTC doesn’t break it’s historical path
-BTC market cap will approach gold market value $5-10T in 2021-2024
-and approach real estate market value $10-100T in 2024-2028
-after 2028 we can no longer interpolate and enter uncharted waters pic.twitter.com/DGf6T87Tdf
— PlanB (@100trillionUSD) December 4, 2020
PlanB’s S2F model simply treats Bitcoin as a commodity and looks at the stock-to-flow ratios for evaluating the current stock of the commodity against the flow of the new production.
The Death of Macros Can Push Bitcoin Higher
Interestingly, PlanB is not alone to expect a 25x jump in the BTC price over the next ten years. Bitcoin billionaires and Gemini exchange founder Winklevoss Twins also believe that this is very much possible. On the other hand, formed Goldman Sachs hedge-fund-manager Raoul Pal in a podcast interview with Anthony Pompliano said that the global macro factors are falling all apart.
Pal further adds that the currency markets are also not holding a convincing future. As per him, this gives Bitcoin considerable leverage ahead. Pal has recently liquidated all his gold holdings and moved it to Bitcoin and Ethereum.
My conversation with @RaoulGMI is now on YouTube.
– Macro economy
– Asset allocation
– Real Vision
– What would change Raoul’s mind
We also cover what the wealthiest investors are saying behind closed doors. Enjoy!https://t.co/SjrUUgbLIo
— Pomp ???? (@APompliano) December 4, 2020
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.