- Just 5 days before the halving, Bitcoin (BTC) has regained $9,000 for the second time
- According to Pantera Capital’s stock-to-flow model, Bitcoin could see a price rally north of $100,000 this summer
- Dan Morehead, the CEO of Pantera Capital, predicts BTC will cross $115,212 by August 2021
- The improvement in the stock-to-flow ratio over each halving is the basis of his research
What is the Stock-to-Flow Ratio?
The stock-to-flow ratio is a standard metric for assessing how abundant a commodity is. It’s determined by multiplying the amount of a product kept in inventories by the amount generated per year.
It is measured in the case of Bitcoin by dividing the current established supply by the BTC mined annually. Approximately 18.365 Bitcoins have been mined, with an annual supply of 657,000 BTC. This yields a 27.9% stock-to-flow ratio.
The buzz around bitcoin hitting 115k USD
The current price of BTC reflects the speculation and enthusiasm surrounding the Bitcoin halving case. Bitcoin has just surpassed both the $9,000 and $9,100 resistance thresholds. It is now trading at $9,261 five days before the halving. As we get closer to the expected halving date of May 12th, a quick look at the BTC/USDT 6-hour chart shows renewed buying interest.
In an emailed newsletter, Dan Morehead, CEO and co-chief investment officer at Pantera Capital, a blockchain hedge fund, wrote: “Bitcoin is now ahead of our April 2020 prediction timeline – to reach $115K this summer.”
Pantera’s forecast is based on the stock-to-flow model, an empirical method that calculates an asset’s price based on the annual issuance schedule. The model calculates the scarcity of bitcoin (BTC). which is calculated by the underlying network programming integrated into the blockchain’s architecture 12 years ago.
The number of new bitcoins generated with each new data block every 10 minutes or so is cut in half every four years under that scheme. According to the stock-to-flow model, as the issuance rate decreases, the bitcoin price should increase.
In conclusion, The shift in the stock-to-flow ratio over each halving is one possible mechanism for assessing halvings’ effect. The first halving decreased the supply by 15% of all bitcoins in circulation. That had a significant impact on availability, and it also had a significant impact on price.