Despite the market carnage on Thursday, the author of a popular Bitcoin
PlanB (@100trillionUSD) says his popular and hugely bullish Bitcoin price model has still not been broken – even after Bitcoin plunged by more than 50 percent in just a matter of hours. The Bitcoin price remains within the standard deviation bands forecast by the model.
Bitcoin Price Battered but Post-Halving Rally Still in the Cards?
BeInCrypto has reported on PlanB’s popular “Stock to Flow” model for determining future prices of Bitcoin based on scarcity many times previously. The projection posits that, all other things being equal, abrupt decreases in the issuance rate of Bitcoin have a direct impact on the cryptocurrency’s price.
Given that the Bitcoin network follows a predetermined set of rules that can only be adjusted by network consensus, the only changes to Bitcoin’s issuance rate come in the form of quadrennial “Bitcoin halvings.” Every 210,000 blocks, the number of new Bitcoin issued with each block mined halves automatically. The next halving, that will see the block reward drop to 6.25 BTC, is due this May.
Previous halvings have preceded colossal gains for Bitcoin holders. The stock to flow model, shown in the tweet below, has largely fit Bitcoin’s previous price movements and, sure enough, dramatic bull market moves do indeed appear to follow the events themselves.
In the image below, the left hand chart shows the stock to flow projected price (thin dark blue line), as well one and two standard deviations from it (lighter blue areas). Even after plunging hard to less than $5,300 at the time of writing, PlanB contends that the model remains intact since Bitcoin price did not even leave deviation bands.
Some people think S2F model broke yesterday. Of course it did not. #bitcoin oscillated nicely around model value and stayed well within model bands. The extreme volatility within the model bands shakes out the weak hands. No extreme returns without extreme risk (volatility). pic.twitter.com/6UB3hO3ZE7
— PlanB (@100trillionUSD) March 13, 2020
The analyst writes that the extreme volatilityWe can describe volatility as how much the value of an asset changes over a given time. A volatility index... More is simply another example of market players shaking out “weak hands.” They state:
“No extreme returns without extreme risk.”
All the Markets Are Reeling; Can Bitcoin Still Benefit?
The recent cryptocurrency free fall coincided with crashes in many other markets around the world. The collapse of an agreement between OPEC and Russia to support oil prices triggered the selloff and underlying fears of the economic impact of the spread of the coronavirus no doubt exacerbated the downturn.
The fact that Bitcoin and other cryptocurrencies did not seem to serve as a reliable safe haven during such uncertainty puts one of its major value propositions in doubt. Many had bought Bitcoin on the assumption that its lack of links to other markets would make it an ideal hedge. A 50 percent move to the downside when almost everything is going down the pan suggests that the time is not right for Bitcoin to serve this end.
When this is over
??The fed will have printed trillions
??USD will have lost value
??Leaders will have lost credibility
?There still won’t be more than 21M $BTC
?#Bitcoin will still be the hardest money ever created
?Next block: still in 10 min
See you on the other side!
— Lina Seiche (@LinaSeiche) March 13, 2020
Despite the clear fear gripping the market, many within the cryptocurrency industry maintain the belief that moves such as the Federal Reserve injecting more than a trillion dollars into the economy will play in Bitcoin’s favor. [Financial Times]
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