A couple of days ago, Bitcoin broke the $20.000 barrier. It took 3 years but we finally did it! Today I want to take a look at what might be possible in the future. Bitcoin is at all-time highs, what’s next? Note that I will mostly look at past price action. This is definitely not a certain indication of what the future could bring, but it can show some possibilities!
An important factor behinds Bitcoin’s price increase the last couple of months (arguably since 2019) is institutional adoption. We have seen a lot of big players in the field getting behind Bitcoin. For example, PayPal has made it possible to buy and transact a couple of different cryptocurrencies. A couple of different companies have also announced that part of their reserves will be held in Bitcoin as well. Funds have also been created and an ETF is probably underway.
In my opinion, this is only the beginning. Institutions are slowly realizing the potential of Bitcoin and other cryptocurrencies. I think more and even bigger companies will jump on the train which makes me very excited for the future.
Previous Price Action
I am going to take a look at the previous bull run to see if there are some things we can learn. Bitcoin had a boom and bust cycle with a peak at the end of 2017. However, this was not the first time such a thing has happened. At the end of 2014, there was a top as well. After this, Bitcoin took around 1200 days to get back to previous highs. Once it hit those highs we had a massive bull run with gains of more than 1500%.
I am not saying that it will go up 1500% from where we are now but the similarities are there. We just had the halving event, exactly like last time. It took ~1100 days to get back to the high which is around the same duration as last time as well. I am very confident that we still have room for the price of Bitcoin to increase. The million dollar question is how much?
Stock to Flow
An often-used model to predict the price of Bitcoin is the stock-to-flow model. The stock to flow model measures the relationship between the currently available stock of a certain resource and its production rate. This model is typically applied to precious metals and other commodities. Arguably it is applicable to Bitcoin as well. With bitcoin, we know exactly how much new supply will enter the market. This makes it easy to chart out. As you can see from the chart below, this model has been quite accurate in the past.
If we take a look at the stock to flow model we see it predicts a price of around $100.000. We can also see the previous cycles peaked quite a bit higher than the stock to flow prediction. At the moment, Bitcoin is still on track. Of course, a model like this is only correct until it isn’t anymore! Other than that, I still find it fascinating.
I am certainly not the one to make price predictions. I am also not a financial professional, not even close. I do believe there still is a lot of room to grow for Bitcoin. Certainly with institutions that are getting into the crypto-space as well. Whatever happens, there are some exciting times laying ahead of us. I hope my fellow cryptocurrency holders are ready for the ride!