Germany's seventh largest financial institution, Bayern LB, has published a report on Bitcoin (BTC) forecasting the price in 90 000 dollars next year.
Based on his forecast for the ratio of stocks to flow, he claims that bitcoin “digital gold” is a “more complex” form of commodity money than gold.
Part of a series of reports on digital megatrends entitled Bitcoin Surpasses Gold, states:
“In relation to bitcoins, an unusually strong correlation arises between the market value of this cryptocurrency and the ratio between existing stocks of bitcoins (“ shares ”) and new offers (“ flow ”).”
Although bank analysts say caution should be the motto when applying this model to bitcoins, they believe this is a useful approach.
Bayern LB concludes that using this hands-on approach provides useful information on how to evaluate Bitcoin.
“It is becoming clear that Bitcoin is designed to be a super hard type of money. Next year it will show the same high degree of hardness as gold. In 2024 (when the next halving occurs), the degree of Bitcoin hardness will increase significantly again,” the report says.
Gold has developed its “hardness” for millennia, while Bitcoin has achieved similar properties through “supply engineering,” namely, the protocol developed by Sataoshi Nakamoto.
The yellow metal is currently valued at $1, down from a high of $491, the highest valuation since April 1537.
Bitcoin has returned 122% from the beginning of the year and 16% gold.
Gold made it the hard way, but Bitcoin is not a "hoax"
The report notes how gold earned its high ratio of reserves to flow in the “hard way”:
“Moreover, there were no labels for the yellow metal: higher reserves could only have accumulated in a shorter period of time if it was easier to mine gold. In this case, however, gold would not qualify as a store of value, and, in turn, no one would keep the yellow metal. "
Thanks to its supply technology, Bitcoin will be able to emulate and even surpass the ratio of reserves and flows of gold.
Of course, the availability of reserves to the flow is associated with a deficit, and with the addition of bitcoin to the complexity adjustment mechanism, the inventor was able to disconnect the price from the flow (supply), which made the offer deterministic.
Using regression analysis, Bayern LB builds a market capitalization that approaches gold by the 2020 year when halving occurs (dividing the block reward in half).
(Source: Bayern LB)
Based on this, the next year the price in 90 000 dollars is postulated, which indicates that Bitcoin is greatly underestimated.
“If the model takes into account the ratio of stocks to the flow of bitcoins for May 2020, then a dizzying price will appear around 90 000 US dollars.”
Bayern LB (Bayerische Landesbank) is one of six state-owned banks in Germany. It is 75% owned by the state of Bavaria and has a balance sheet of 220 billion euros.
The full report is available here.