Bitcoin “Should” Be Worth $67,000. Um, Really?

Bitcoin “Should” Be Worth $67,000. Um, Really?
Carl Hazeley

over 1 year ago1 min

The “stock-to-flow ratio” – which estimates the price of bitcoin based on its current supply and the amount that’s produced each year – has historically been considered the single most accurate tool for predicting where the OG crypto’s price will head next. But lately, it’s been pretty off base: it was calling for a price of around $82,000 about a year ago, and now, with bitcoin’s price at $21,000, its estimate is sitting at around $67,000.

As for why it’s been so far off the mark, the model’s critics have been quick to point out its various flaws: it doesn’t take demand for bitcoin into account, it failed to predict bitcoin’s recent tumble, and it hasn’t worked for any other asset. Plus, it was always bound to stop working one day, given that it would predict an infinite price once all 21 million bitcoin are mined.

But as statistician George Box famously wrote, “All models are wrong, but some are useful.” And since so many crypto investors pay attention to it, that’s very true of this one – as long as you take what it’s saying with a generous pinch of salt.

Bitcoin’s price has tumbled 56% so far this year, after all. And although the stock-to-flow model has adjusted bitcoin’s price significantly downward, it’s still over three times higher than the current price, suggesting significant potential upside. Go figure.



All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG