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Will Bitcoin cross $100,000 this year? Key index suggests BTC sits at a make-or-break point

  • Bitcoin price gains show the most significant divergence ever seen after January 2019, from the stock-to-flow (S2F) model.
  • The next six months will make or break the S2F model.
  • Plan B is open to the possibility it gets invalidated, revealing a key BTC price level for August.

Bitcoin price diverged over 50% from the S2F model predictions, and its creator admitted that it made him uneasy. Plan B has suggested that the bull run is just on pause, and Bitcoin price will go above $47,000 by the end of August. This new prediction is a make-or-break point for the S2F model. 

S2F model faces serious bear calls as Bitcoin trades below target

On the back of two Bitcoin halvings and nearly eight years' worth of historical price data, independent Bitcoin analyst Plan B created the S2F model. Bitcoin price has mapped the model's projections with near accuracy and a few deviations since it was created. But after the recent divergence between BTC price and the stock-to-flow model, analysts are raising concerns about the validity of this on-chain metric.

The S2F ratio measures the supply of Bitcoin that entered the market relative to its total supply. A higher S2F ratio is indicative of an asset retaining its value well over the long term. This model generally applies to natural resources, but Bitcoin's scarcity inspired Plan B to use this model to predict its price. 

Experts have argued that several events have an impact on an asset's price, and scarcity is not the only one. However, Plan B has overlooked externalities when predicting Bitcoin price. 

The analyst expressed his unease at the divergence of the flagship cryptocurrency price from his projections and questioned whether this would invalidate the stock-to-flow model. 

In response to Plan B, Preston Pysh, founder of Buffetsbooks.com and famous finance educator on YouTube, said,

You mean your model doesn't account for 40%+ of mining rigs getting banned & forced to turn-off & relocate to various parts of the world...and with no forward notice to companies/entitles for the extraordinary expense to their heavily denominated BTC treasuries/retained earnings.

It is important to note that Pysh had argued in November 2020 that if the hashing for the network fluctuated over time, the S2F model would not work. The largest negative mining difficulty adjustment in the history of Bitcoin agrees with Pysh’s argument, and it may have triggered the recent divergence among other external factors. 

Pysh had shared his thoughts on the validity of the S2F model with his followers through his Twitter thread back in 2020. 

Plan B's followers have become less enthusiastic at the likelihood of Bitcoin price hitting the target of $100,000 this year. The analyst ran a poll on Twitter and confirmed that the number of traders who believe that Bitcoin will stay below $100,000 this year has increased by 25% since March 2021. 

Bitcoin bull market is not over yet, model variance is closing in

Plan B proposed best and worst-case scenarios for Bitcoin. Even though the pioneer cryptocurrency has slumped over 50% since mid-April, the renowned analyst believes that the bull market is not over yet. He argued that $64,000 was not the top and his floor indicator says that Bitcoin price will move back above $47,000 by the end of August.

Coming from the creator of the S2F model, $47,000 is now a key price target for Bitcoin. If it fails to hit this level by then, the S2F model will likely be labeled invalid by the crypto community. 

Plan B has never shied away from admitting that the model may be invalid, and another Bitcoin analyst and YouTuber, Carl Martin, shares his bullish outlook. 

The new prediction of $47,000 by the end of August is now the make-or-break point for Bitcoin's year-end target of $100,000. This price target will become crucial to determine the validity of the stock-to-flow model.

Author

Ekta Mourya

Ekta Mourya

FXStreet

Ekta Mourya has extensive experience in fundamental and on-chain analysis, particularly focused on impact of macroeconomics and central bank policies on cryptocurrencies.

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