How does $400,000 per bitcoin sound? Most likely outlandish, especially if it is expected within the next five years.
But that is exactly the price the analysts at Los Angeles-based investment management company Wave Financial believes bitcoin could reach, using the investment analysis model stock-to-flow ratio, by as early as 2025.
One of the most interesting parts of our report, released in late February 2021, is the illustration of how the stock-to-flow ratio was used to accurately predict the movement of the bitcoin price from $4,000 in March 2019 to about $50,000 in February 2021. Stock-to-flow ratio is primarily a gold valuation model. The fact that it works better on bitcoin than most of the other models gives credence to the belief of many that bitcoin is digital gold.
We say in the report, titled “Understanding Bitcoin’s Impact On Portfolio Performance,” that “a $55,000 prediction seemed relatively outlandish in March 2019. But today $55,000 seems like a reasonable target for 2021. The target price of $400,000, once again, seems outlandish today.”
As we now stand in March 2021, a month on from the report being published, some of our price targets are now out of date, with bitcoin surpassing the $60,000 level.
In mid-February, bitcoin achieved a new all-time high price of $50,000 and, for the first time, a market cap of over $1 trillion. This is a market rally that was predictable by considering the mining subsidy halving that happened in 2020 and the growing adoption of bitcoin as an institutional reserve asset.
In 2024, the bitcoin subsidy, the new coins released to circulation, will reduce from 6.25 BTC approximately every ten minutes to 3.125 BTC. In 2020, the mining subsidy dropped from 12.5 BTC. The subsidy halving happens every four years, making bitcoin a deflationary asset, which we believe is one of the main bullish drivers of its price.
Meanwhile, increasingly, mainstream corporate entities and investment firms have…