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Study Suggests Scarcity Could Drive Bitcoin Prices to $60,000 by May...


bitcoinist.com 22 August 2019 05:50, UTC
Reading time: ~3 m

Bitcoin price predictions have been coming thick and fast in recent months as the world’s top digital asset recovers from an almost year-long bear market. Some are just pie in the sky, but others have delved deeper into what could drive BTC prices to a new all-time high in the months ahead.

Scarcity Will Increase Demand For Bitcoin

Crypto focused research firm, Digital Asset Research, has recently released a new bitcoin price prediction model. It makes the bold claim that, based on the premise of scarcity, bitcoin’s price will reach $60,000 by May 2020. This will increase its market capitalization to over a trillion dollars.

The model has extrapolated previous price pumps to predict a future one. Its basis is on the BTC block reward halving which is due in May 2020. This usually bullish event has the effect of increasing the perception of a reduction in supply which in turn will increase demand and push prices higher.

The study was based on an original one by twitter user and crypto analyst ‘PlanB’ which looked at monthly supply and price data, and calculated a stock to flow ration which equates to the inverse of its inflation rate.

Previous halving events were analyzed and Digital Asset Research found that BTC price tended to peak about a third of the way through each halving cycle, with each high topping the previous. A continuation of this would result in a price ceiling in the next cycle around September 2021.

The study also noted that a large cash flow would be needed to send bitcoin market cap up to the $1.25 trillion required to hit this price target. This could possibly come from institutional investors looking to hedge against fiat currencies that are being manipulated and devalued across the globe.

If the current macroeconomic and geopolitical conditions continue, it could come from a number of sources: currencies that are devalued or lose purchasing power, gold investors that view Bitcoin as a higher beta version of gold, or from currently negative-yielding debt, which recently topped $15T worldwide.

Litecoin Halving Observations

Using the same methodology, the researchers concluded that the model does not apply to Litecoin which goes through reward halvings every 840,000 blocks instead of 210,000 blocks, and has four times the supply.

The recent Litecoin halving has also been viewed as a possible precursor to what may happen to bitcoin in nine months. According to Longhash.com, which studied LTC metrics before and after the halving event, there is very little to go on as an indicator of what may happen to BTC.

Litecoin price spiked before the halving but has dumped after it which was somewhat predictable but the fundamentals of the network have not changed. The price drop has been attributed to a wider crypto market decline rather than anything halving related. As a counter to the Digital Asset Research study, the bitcoin halving may too be underwhelming if Litecoin is anything to go by.

Will BTC hit a new ATH before the halving? Add your thoughts below.

Images via Shutterstock

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