There is a lot of optimism concerning Bitcoin for years to come. Despite this, many people still expect it to be worth less than $55,000 per coin by the end of the year 2021. A Twitter poll by the pseudonymous creator of Bitcoin’s stock-to-flow model ‘Plan B’ shows that most respondents (42.5% of 26,639) believe that Bitcoin will be below this price level. This is followed by 22.9% who think the price will go up to $100,000 while 17.4% and 17.2% believe the price will be at $288,000 and above $55,000 respectively.
Each of the prices is projected based on the Stock to Flow (S2F) model which is used to prognosticate Bitcoin’s price by considering projected scarcity.
Respondents don’t believe in S2F
The S2F model is a simple way to measure how much of a resource there is. The stock to Flow ratio is how much of the resource is in circulation divided by how much more of it is coming into the circulation, say per year.
The model compares Bitcoin to scarce resources like gold and given that the number of Bitcoins mined is cut in half every 4 years, its stock to flow ratio gets progressively higher and that should make it more valuable over time. This is the basis of optimism that is backed by this model.
However, the result of this poll clearly suggests that most of the respondents (42.5%) do not believe in S2F or do not understand how Bitcoin works as some people say. Apart from S2F, several other models have been used to forecast Bitcoin’s future price and they suggest that Bitcoin will only get scarcer which will make the asset to become more valuable in years to come.
It may be too early to tell if Bitcoin will remain below $55,000 in 2021 or not, but what would be interesting is to know if a new all-time high will be reached by then. Some analysts believe a new all-time high may even be reached by the end of 2020, but this also remains to be seen.
