German bank says Bitcoin to $90k – Moonhub
BayernLB drew much of its research from an anonymous Twitter user.
So this is an odd one. BayernLB, one of Germany’s largest banks, has recently put out a report suggesting that bitcoin could be seriously undervalued and is about to soar over the coming months.
In the report, BayernLB ‘counsels caution’. However, using the stock-to-flow ratio as a means of analysis and valuation, the bank states that bitcoin is ‘designed as an ultra-hard type of money’.
Stock-to-flow is simply the ratio of a commodity in existence (e.g. gold, silver, bitcoin) to the amount created in a year. It’s effectively the annual inflation. For other commodities, the market adjusts; the bank gives the example of silver miners increasing production when prices rose towards $50 a few years ago, ultimately dumping a glut of newly-mined silver on the market and crashing the price. The same happened in the Gold Rush of 1896. Bitcoin, however, is immune to this. ‘Satoshi’s “stroke of genius“ was to decouple supply from price and from mining efforts.’
This truly was a stroke of genius, because it enforces a given and predictable stock-to-flow ratio, forever.
The research report compares different metals with bitcoin, concluding that bitcoin is the hardest form of money in the world and that it is set to become significantly harder than gold in the coming years — especially after 2024’s halving. ‘If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000 (the current model value is roughly USD 7,500).’
So here’s the weird bit. The report takes many of its insights from the anonymous Twitter user and bitcoin analyst PlanB: https://twitter.com/100trillionUSD
PlanB pioneered this approach, and various other ways of valuing bitcoin with stock-to-flow ratios and other means. A Twitter thread suggests that BayernLB originally did not credit him with the research, though they have since added his handle to the paper.
The report warns that price rises are not a done deal: instead, the 2020 halving will be a major test for the validity of the stock-to-flow model for bitcoin valuation (which has held well so far). Nonetheless, they view it as a solid model.
We await May 2020 with keen interest.
Article by Moonhub
Published at Sat, 05 Oct 2019 21:38:36 +0000
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