Today, Bitcoin’s market cap is over $450 billion.
That means the market values it as much as JP Morgan, Bank of America, and Citigroup… combined.
These traditional banks have CEOs, hundreds of thousands of employees, hundreds of millions of customers, operate in nearly every country of the world, and profit tens of billions of dollars every year each.
Bitcoin does not have any of these things.
Traditional financial measurements such as the price-to-earnings ratio and the debt-to-equity ratio can’t be used to value it.
Bitcoin is not an “income-producing firm” with profits or debt. To evaluate the intrinsic worth of this technology, there are no “future cash flows” to forecast and discount back to the present.
But that does not make Bitcoin worthless, of course…
All you need is a new way to value the asset.
Today, we’ll demonstrate how to value Bitcoin using a new approach, one that allows us to compare its worth to other scarce assets such as silver ($1.4 trillion market cap) and gold ($12.1 trillion market cap).
Because Bitcoin isn’t an income-producing enterprise, it can be compared to these precious metals, which have enormous value in the globe because they’re likewise restricted in production and unforgeable.
To date, this model has predicted Bitcoin’s price with 96% accuracy within two standard deviations of its projected mean.
It also predicts that by this year, Bitcoin will finally surpass $100,000, giving it a roughly $2 trillion market cap.
Let’s get started…
Why Bitcoin Could Hit $100,000 This Year
If you buy Bitcoin, your greatest bet for profit is to keep it and never sell it.
Two of the most typical blunders made by Bitcoin investors are:
- Not purchasing more at a lesser cost.
- Selling, because the price inevitably goes higher.
Understanding the Bitcoin stock-to-flow model (S2F) is the first step in understanding why most people make these mistakes.
The S2F model has been 96% accurate in predicting the price of Bitcoin – back-tested since its conception in 2009. It was highlighted by Saifedean Ammous in his highly praised book, “The Bitcoin Standard: the Decentralized Alternative to Central Banking.”
More recently, however, an unnamed quantitative investment manager known only as “PlanB” has expanded upon and popularized the strategy.
Like Satoshi Nakamoto, this gentleman’s true identity is unknown to the general public. We do know, though, that he lives in Amsterdam and oversees billions of dollars in assets undermanagement for his clients.
We also know that some of the world’s brightest quantitative investment managers have run the numbers and put his work on the stock-to-flow model to the test…
Nobody has ever been able to refute its accuracy.
The fundamental concern is whether the model will continue to work in 2022 and beyond.
Only time will tell if this is true.
But you simply can’t ignore Bitcoin and the S2F model any longer since it isn’t broken yet.
Explanation of the Bitcoin Stock-to-Flow Model
To begin, we must define what “stock” and “flow” mean in the context of the model.
“Stock” refers to the total number of Bitcoin in circulation today. There are 18,997,731 Bitcoins saved in the memory of tens of thousands of nodes throughout the world at the time of writing (March 30, 2022).
The number of new Bitcoins mined each year is referred to as “flow.”
Every 10 minutes, 6.25 new Bitcoins are added to the market, according to the current mining schedule. Over the course of 365 days, a maximum of 328,500 new Bitcoins will be minted and in circulation.
Simply divide all of the Bitcoin in existence by the number of Bitcoins that will be mined in a year to get the stock-to-flow of Bitcoin.
So, 18,997,731 divided by 328,500 equals 57.8. The stock-to-flow ratio of Bitcoin is 57.8.
That indicates that mining Bitcoin at its current rate would take 57.8 years to double the global supply of Bitcoin.
This means that, as you’ll see in the next section, Bitcoin is more than twice as scarce as silver, and already slightly less scarce than gold today.
Bitcoin should be worth more than all the silver in the world ($1.4 trillion) since it is more scarce than silver. However, this is not the case, and one could argue that Bitcoin is currently undervalued as a result.
Bitcoin should be worth less than all the gold in the world ($12.1 trillion) since it is less scarce than gold. However, by 2024, Bitcoin will be about twice as scarce as gold. Therefore, it’s possible that it’ll be worth hundreds of thousands of dollars, then millions of dollars per coin…
Silver and Gold’s Stock-to-Flow Ratios
Today, the world’s silver reserves are estimated to be at 550,000 tons. Every year, 25,000 additional tons are mined.
The stock-to-flow ratio for silver is 550,000 / 25,000 = 22.
To double the world’s silver supply, it would take 22 years of mining at the current rate of production.
Now it’s time for gold…
Today, the world’s gold reserves are estimated to be over 185,000 tons. Every year, 3,000 additional tons are extracted.
The stock-to-flow ratio for gold is 185,000 / 3,000 = 62.
If gold mining continues at its current rate, it will take 62 years to double the world’s gold supply.
Remember how we proved how mining Bitcoin at its present rate will take 57.8 years to double the global supply?
In 2024, that number will double.
And, according to the stock-to-flow model, these “halving” events precede Bitcoin bull markets…
What Sets Bitcoin Apart from Silver and Gold
Miners of gold and silver will mine more of these precious metals as their values climb. And the number of companies/people who can and will do so is limitless.
As a result, gold and silver prices tend to fall as their “flow” rises.
You can’t do that with Bitcoin.
When the Bitcoin price rises, more Bitcoin miners will turn on their computers in order to profit… But no more than the programmed amount of Bitcoin can enter the market.
Because Bitcoin has a difficulty adjustment algorithm built in, the quantity of new Bitcoins that may be mined every 10 minutes is limited.
And every 210,000 blocks (approximately every four years), the number of coins that can be mined every block cuts in half. These are called “halvings” and they’re crucial to Bitcoin’s deflationary monetary policy.
The maximum amount of new Bitcoins that can be mined every block is slashed in half during each halving. Bitcoin’s S2F ratio is technically increasing every 10 minutes as new Bitcoins are mined, but the halvings are how it doubles.
Later this year, the stock-to-flow ratio of Bitcoin will surpass gold, which means that Bitcoin will actually be more scarce than the precious metal that has been used as currency for thousands of years.
Typically, Bitcoin bull markets ensue 12 to 24 months after halvings. So, the summer of 2022 should be very interesting.
The price of Bitcoin will rise if demand remains constant while new supply is cut in half.
The power logarithmic function PlanB developed into his stock-to-flow model backs this claim. To date, it has been 96% accurate (within two standard deviations of the mean), and no one has been able to prove its results statistically.
The stock-to-flow model forecasts that after the May 2020 halving, the price of one Bitcoin will range from $20,000 to $200,000 in 2022.
Its average target is about $100,000 (roughly a $2 trillion total market cap).
It’s easy to see in the official chart below:
As you can see from the chart, previous bull markets have occurred in the 12-to-24-month periods following previous Bitcoin halvings.
After the first halving of Bitcoin per block from 50 to 25 in November 2012, when one Bitcoin was worth roughly $11, it soared 11,136% to $1,236 in December 2013.
In July 2016, while one Bitcoin was selling around $650, the second halving from 25 to 12.5 Bitcoin per block occurred… And it rose as much as 2,960% to $19,891 in December 2017.
That’s why, even with Bitcoin currently worth about $47,500 after its third halving from 12.5 to 6.25 Bitcoin per block on May 12, it’s not unreasonable to expect it to double to $100,000 before the end of the year.
In order to drive Bitcoin to $100,000, Plan B thinks the liquidity could come from, “Silver, gold, countries with negative interest rates (Europe, Japan, and the United States soon), countries with predatory governments (Venezuela, China, Iran, Turkey, and others), billionaires and millionaires hedging against [inflation and quantitative easing], and institutional investors discovering the best performing asset of the last ten years.”
PlanB claims that if Bitcoin becomes twice as scarce after each halving, silver and gold investors will be more likely to trade in their precious metals for Bitcoin.
For what it’s worth, if the model remains true after the third halving, it’ll be fascinating to see what occurs in the 12-24 months following the fourth halving from 6.25 to 3.125 Bitcoin per block.
Why Is Now the Best Time to Invest in Bitcoin?
Most people will never be able to afford one Bitcoin if the stock-to-flow model can predict the price of Bitcoin with 96%+ accuracy over the next decade.
Only 21 million Bitcoin will ever exist by the year 2041, when they are all mined.
It’s impossible for the 56.1 million millionaires in the world to hold more than one Bitcoin at the same time because only 21 million Bitcoin will ever exist, after all.
While $47,500 may appear to be a significant amount to pay for one Bitcoin today, when you realize that its $903 billion market cap only represents 0.05% of all money in the world, you can see how early we still are.
Keep in mind the two most typical blunders made by Bitcoin investors:
- Not purchasing more at a lesser cost.
- Selling, because the price inevitably goes higher.
When you’re ready to acquire Bitcoin, keep in mind that you can start with as little as $0.01 at a time (every Bitcoin can be broken down into “satoshis,” or 0.00000001 bitcoin).
Even a small percentage of your salary might make a big difference in five years. In the scenario in which you risk 1% of your total assets, you can still win big without risking much.
As Satoshi said himself, “It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy.”
Stay tuned for the final section of our free Bitcoin report tomorrow, where we’ll explain in detail the best ways to safely buy and store your Bitcoin for the long run. You’re not going to want to miss it.
Bitcoin’s Big Bottom?
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My name is Nilus Mattive, and I’ve specialized in conservative investment strategies ever since I started working on Wall Street back in the late 1990s.
If my name sounds familiar, it’s probably because you recognize me from an appearance in BusinessWeek, MarketWatch, Fox News or some other media outlet. Or maybe you’ve seen my investing books for sale at your local store or on Amazon.
But this report is about something I’ve never discussed publicly before: Why I believe right now is the best time to consider putting some money into the cryptocurrency markets.
That probably sounds pretty shocking coming from someone like me. After all, I’m best known for talking about dividend stocks, Social Security strategies and other fairly traditional ideas.
Meanwhile, we’ve seen a lot of bad things in the crypto markets over the last year – everything from the Luna debacle to the collapse of the FTX exchange.
And plenty of other well-known investors – including Warren Buffett – continue to say cryptos are a total scam.
Which is precisely why I’ve come out to give investors my unbiased look at the space.
As you’ll see, I DO think many cryptos will go to zero, just like we saw in the wake of the NASDAQ collapse 20 years ago.
At the same time, I also believe a handful of cryptos have far more upside potential than even some crypto bulls currently believe possible.
But don’t take my word for it.
Just click here to watch my free video and decide for yourself.
P.S. Make sure you stick around to the end – that’s where I not only name seven big cryptos that could go to zero, but also discuss some of my favorite plays and strategies for 2023.
