Bitcoin has suddenly shot higher, climbing to a fresh all-time high of over $63,000 per bitcoin as the cryptocurrency community gears up for one of its biggest ever events.
The bitcoin price, now up more than double where it started the year, has soared as long-awaited institutional investors finally warm to bitcoin and the likes of Tesla
Now, as the crypto community wars over the future of decentralization, a bitcoin price model that accurately predicted bitcoin’s latest breakout has forecast the bitcoin price could peak at just over $100,000 in August.
“The model suggests bitcoin could hit $115,212 in August 2021 based on the relative stock-to-flow ratios of the previous two halvings,” Dan Morehead, the chief executive of crypto investment company Pantera Capital, says via email, adding he thinks bitcoin could be entering “a multi-year bull market given the confluence of macro factors, growing fundamentals, and innovation happening in the space.”
Bitcoin went through its third halving in May last year, with the bitcoin reward paid out to those who use their computers to secure the bitcoin network, known as miners, cut in half. The stock-to-flow pricing model, created by anonymous Twitter user PlanB, who tweets from the handle @100trillionUSD, calculates value by weighing the existing supply of an asset against how much is entering circulation.
“One potential framework for analyzing the impact of halvings is to study the change in the stock-to-flow ratio across each halving,” says Morehead, who was formerly Tiger Management’s chief financial officer and founded Pantera Capital in 2013. “The first halving reduced the supply by 15% of the total outstanding bitcoins. That’s a huge impact on supply and it had a huge impact on price.”
The bitcoin price climbed sharply following its previous halvings, with Morehead’s model forecasting a similar scenario will play out this year.
“Extrapolating this relationship to 2020: The reduction in supply is only 40% as great as in 2016,” says Morehead. “If this relationship holds, that would imply about 40% as much price impulse—bitcoin would peak at $115,212” in August 2021.
Pantera’s halving stock-to-flow projection predicted that the bitcoin price would hit $63,000 this week—a forecast Morehead described on Twitter as “ridiculous.”
Elsewhere, others in the bitcoin and cryptocurrency community are feeling bullish as major crypto exchange Coinbase gears up for its long-awaited initial public offering (IPO) on Wednesday.
“Since Coinbase filed officially for their IPO in late February, the total crypto market cap has risen approximately 45% to over $2 trillion,” Carlos Betancourt, a principal at digital asset hedge fund BKCoin Capital, said in emailed comments.
“This is not all due to Coinbase going public, but investors have taken this event positively and turned to a more on-risk attitude, driving all [crypto] prices up significantly.”
Meanwhile, Morehead does see risk to the bitcoin price from an increase in government oversight, however—unlike some bitcoin and cryptocurrency watchers—he’s confident regulation isn’t an existential threat to bitcoin.
“Potentially the biggest risk is governments tightening regulations around cryptocurrency, but we believe this is more of a factor of the past,” says Morehead. “Regulators are aware of the benefits that digital assets and blockchain technologies provide.”