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Bitcoin achieved its newest all-time high of the year last month when it soared above $68,000 for the first time. Within a handful of days, it had gone down below $56,000. After beginning the year below $30,000 in January, this current peak represents a massive gain in Bitcoin’s price. Day-to-day and hour-to-hour, its value changes significantly.
Still, many analysts predict Bitcoin is on its path to exceeding the $100,000 milestone, but with differing ideas on precisely when that will happen. Because of this, experts suggest new crypto investors to use extreme caution when deciding how much of their portfolios should be allocated to cryptocurrencies.
November is often a month of strong price activity in the crypto industry. It will be fascinating to see whether bitcoin continues to explore the unknown territory. Amidst this, pseudonymous crypto analyst Plan B has made a wild prediction for BTC price, estimating that the price of bitcoin may reach $98,000 in November. So far, as can be seen in the tweet below, PlanB was roughly exactly correct regarding the price of bitcoin in August and September.
So who is Plan B?
As a Dutch institutional investor with a law and quantitative finance background, PlanB has amassed a huge following on Twitter. He established the bitcoin Stock-to-Flow (S2F) model, which utilizes scarcity to value bitcoin. The S2F paradigm is not limited to bitcoin; it also applies to gold, silver, and other assets. He is currently employed as an investment manager as part of a team responsible for the management of a multibillion-dollar balance sheet. After Bitcoin’s third halving event in May 2020, PlanB’s S2F concept has often been referenced.
Why is everyone so hyped about Plan B’s $100,000 prediction?
If you’ve been involved with the cryptocurrency space for some time now, you’d know that this isn’t the first time someone has made such a massive bet on Bitcoin. We’ve seen much bigger and unreal predictions, but what’s different about Plan B’s goal?
To comprehend this, we must revisit a paper that he wrote sometime back. According to PlanB’s “Modeling Bitcoin Value with Scarcity,” paper, precious metals with fixed costs and limited supply have played monetary roles throughout history. For instance, while there is a finite amount of newly-mined gold, there is no way to recover the massive global gold reserves that already exist. This makes gold a particularly attractive investment. PlanB then says that the same logic applies to bitcoin, which increases the value as the supply is reduced every four years to a maximum of 21 million bitcoin.
He then plots bitcoin’s SF vs its USD market capitalization, as well as two randomly chosen SF data points for gold and silver. The research reveals that there is a statistically significant relationship between USD market capitalization and SF values, as evidenced by linear regression with an R2 (a statistical measure of how well data fits a regression line) of 0.95. The two randomly chosen data points for gold and silver are aligned with bitcoin’s trend and serve to support the hypothesis.
Source: PlanB Original Paper
This has prompted the SF model to go viral, encouraging others to bet it all on bitcoin’s future. But many believe the model is just as accurate at predicting bitcoin’s future price as other models were at projecting financial events.
As of now, three models enable the analyst to “triangulate” the Bitcoin market. He integrates his stock-to-flow (S2F) model with on-chain analysis and the floor model discussed above.
Three models enable the analyst to “triangulate” the Bitcoin market. He integrates his stock-to-flow (S2F) model with on-chain analysis and the floor model discussed above.
Following Bitcoin’s recent correction, PlanB has confessed that, for the first time, his worst-case scenario for BTC price fluctuations is going to be proven incorrect. At the end of November, the analyst’s model predicted that the asset would be worth $98,000, but that seems far-fetched.
Even if the floor model looks to be faulty, PlanB claims it does not impact the controversial S2F model that put him on the map.
Ultimately, no analytical technique can be claimed to be 100% correct. Perhaps this is the primary reason why experienced traders use a variety of technical approaches. However, whether or not the SF model will be correct in predicting its end-of-year objective is yet to be seen.
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