This indicator suggests Bitcoin could be worth as much as $100,000 in 2020

25 May, 2019 | Updated: 25 May, 2019
by Richard Allen
Bitcoin
This indicator suggests Bitcoin could be worth as much as $100,000 in 2020

Bitcoin could be worth as much as $100,000 by as soon as next year. That’s if you believe Dr. Julian Hosp.

Dr. Hosp, author of Cryptocurrencies Simply Explained, studied Bitcoin’s future performance based on the Stock-to-Flow (SF) ratio. It’s generally used in commodity markets but Dr. Hosp has applied it to Bitcoin. Simply, the ratio shows the amount of an asset held in inventories (stock) and divides it by the amount produced annually (flow) to reveal how long would it take current production to reach the full amount currently in the market.

Dr. Hosp explains that a higher ratio is better because it indicates lower inflation. As an example, he says it would take gold 62 years to reach from stock to flow. By comparison, it would take silver about 22 years.

Bitcoin, however, would take about 27 years to reach its circulating supply of 17.7 million (stock) at the current production rate of 657,000 a year. It’s important to note that this is calculated on the production of 12.5 BTC every ten minutes. After the halving next year, Bitcoin’s annual flow will reduce drop to 328,500.

Dr. Hosp continues, stating that production is the key factor in determining an asset’s value. Using gold as an example, he notes that if the price rises, production rises since miners are more motivated to earn higher profits which results in a decrease in the metal’s SF Ratio. This then causes overproduction where supply outweighs demand, thus prices drop and the ratio increases.

With Bitcoin, however, Dr. Hosp says “even if the price goes up, you cannot produce more Bitcoin. […]  There is always the same amount of flow because it’s 12.5 Bitcoins every ten minutes.” As such, price remains the only factor for increasing Bitcoin’s SF ratio.

Looking at Bitcoin’s future, the analyst states that with the upcoming halving, the assets SF ratio will double to 54, bringing it much closer to gold’s. As such, he predicts Bitcoin's price to hit at least $100,000. He said:

“Suddenly, we have way less production […] so in order to keep the ratio stable, the price [of Bitcoin] needs to double. But it’s so much lower right now compared to gold, that if we get closer to [gold], the price should approximately go to $100,000, maybe even $300,000.”

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Read more about: Bitcoin (BTC)

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