On June 20, when Bitcoin was priced below $ 34,000, an analyst predicted that the cryptocurrency would rise by $ 13,000 by the end of August.
Bitcoin price closed at $ 47,156 on August 31, less than a third less than the forecast.
The person who made the forecast, a pseudonymous Dutch analyst named PlanB, is known for the “amazing” accuracy of its stock-to-flow (S2F) model, which is based on Bitcoin’s built-in scarcity.
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S2F works by dividing the current supply (inventory) of an asset by its annual production (flow), which for Bitcoin halves every four years or so. These four-year cycles are accompanied by boom and bust price rallies and corrections, with new highs reaching around 12 to 18 months after each halving event. The last halving happened in May 2020 and Bitcoin hit a new record high just 11 months later – but according to the S2F model, this was only the first leg of the rally.
According to PlanB’s worst-case scenario, Bitcoin will return to its all-time high of $ 64,000 by October, before reaching $ 98,000 in November and $ 135,000 in December.
The simplicity of the model means it is prone to being off course due to a variety of external factors, as demonstrated when Bitcoin tumbled from $ 64,000 to below $ 30,000 between April and June. That correction came amid a devastating mining crackdown in China and Tesla’s announcement to reverse its decision to accept Bitcoin.
A massive upswing fueled by positive news like El Salvador’s Bitcoin law to make it legal tender has caused the cryptocurrency to return above $ 50,000 and fall again in line with the S2F model.
“All of these predictions can be destroyed by a Black Swan event like a Bitcoin ban, a Covid escalation, a war with China, etc.,” PlanB told The Independent.
“ETF approval or the spread of success in El Salvador or favorable legislation could be the trigger for the next step. And of course the complete lack of salespeople at one point – in my opinion we will be approaching that point in a few months. “
There are more than one version of the S2F model, with the first released in March 2019 – when Bitcoin was worth less than $ 4,000 – predicted a high of $ 55,000.
A revised version released in April 2020 hit Bitcoin that cycle for $ 288,000. By the next cycle in 2024, Bitcoin will be on track towards $ 1.1 million.
PlanB’s forecasts continue to be implemented “like clockwork” and bring him more than 700,000 followers on Twitter. However, the S2F model does not lack criticism.
Vitalik Buterin, who founded Bitcoin’s closest rival in terms of market capitalization, called the S2F model an “unfalsifiable” theory, while prominent fund manager Nico Cordeiro dismissed it as “just mathematical marketing”.
Both comments were made last June when Bitcoin struggled to cross the $ 10,000 mark.
Bitcoin’s notorious volatility means that it is never more than bad news from a sudden crash, but PlanB remains optimistic and urges people to look at cryptocurrency market moves for the longer term.
“Nobody who bought Bitcoin and [held] lost money for more than four years, ”he said. “Ever.”