Demystifying Bitcoin’s Remarkably Accurate Price Prediction Model

The top question on everyone’s mind when it comes to bitcoin is what the price will be in the next two to five years. Unfortunately, there is no universally accepted route to making such an assessment. Some investors prefer a more fundamental approach, where they evaluate macro trends to identify future performance. Such variables could include the ongoing shift to electronic payments as well as inflationary spending by central banks in response to the economic destruction brought by the pandemic. Fundamental analysts also go to great lengths to assess an asset’s intrinsic value, meaning the properties that make it unique and valuable. A great deal of effort has been spent to define bitcoin’s intrinsic value, which is derived from a combination of its capped supply, network security, divisibility (bitcoin can be broken down to eight decimal points) and transportability. Other investors, especially hedge funds take a more quantitative approach to investing. When using this route they care less about the intrinsic value of an asset and instead execute a trading strategy based on opportunities identified through the technical reading of price charts, because price movements represent pure demand, supply and of course investor sentiment and psychology. These investors use a variety of models and metrics to develop a strategy, and they often trade in and out of positions extremely quickly. Most rely on algorithms to automatically execute trades.*- Excerpted from our premium research service Forbes CryptoAsset and Blockchain Advisor. Click here to subscribeThat said, these approaches are not mutually exclusive, and many traders incorporate a combination of each in their strategies. Additionally, there are some technical models that require an element of fundamental analysis to make sense. An example is Stock-to-Flow (S2F), one of the most accurate price prediction models that we have seen in crypto to date. Before getting into the details of S2F, it is important to clear up one common misconception. Although it was popularized in crypto by the pseudonymous PlanB, who described himself to me as a Dutchman in his 40’s with degrees in law and economics who has spent the last 25 years in traditional finance, he did not create S2F. Instead, because of bitcoin’s intrinsic value as a deflationary asset he applied the metric to create a price prediction model that ties the value of an asset to its current S2F ratio. The results have been very compelling. In fact, S2F has probably been the most accurate tool that we have for predicting bitcoin’s price. See for yourself. S2F is elegant in its simplicity. You simply divide the current supply (stock) of a commodity or asset by its annual production (flow). When PlanB debuted the bitcoin S2F model in 2019, he included a chart that compared its value with that of other commodities and precious metals with varying degrees of scarcity.

#value #newschannel #cnnnewstoday #newstodayoncnn #kingworldnews #newstodayusa #