Bitcoin is still by far the number one among cryptocurrencies and will probably stay there for the foreseeable future. No wonder banks are also putting a lot of effort into analysing the popular asset. The BayernLB (Bavarian Country Bank) just recently published an analysis report and surprised the community with a positive outlook for the Bitcoin price in 2020.
According to the market research report of September 30, the upcoming halving of the mining rewards is not yet priced in and Bitcoin is therefore severely undervalued. In the report, the bank compares gold and Bitcoin and raises the thesis that Bitcoin has now reached the level of gold as a store of value. According to the bank, the Bitcoin price in 2020 could leave even it behind eventually.
To support this thesis, the authors of the report use the stock-to-flow value, which considers the “hardness” (how stable in value for example gold, FIAT money or BTC are over time) of an asset. Gold has taken several thousand years to reach its current level of hardness, while Bitcoin has caught up in just a few years, threatening to leave gold behind in the coming years. A fact that looks very promising for the bitcoin price in 2020.
To understand BayernLB’s conclusion, one has to understand the stock-to-flow value. The stock-to-flow ratio describes the production amount of an asset in relation to the current available supply. The result is the degree of hardness, or more simply put, the ability of an asset to hold its value over time. In terms of value stability over time, Bitcoin has already started to surpass gold according to the Bayerische Landesbank.
Manuel Andersch adds to this:
“Historically, the asset with the highest stock-to-flow ratio has always been used as money, as it has allowed the best value transfer over time.”
The high and increasing stock-to-flow ratio of BTC and the upcoming halving of the BTC mining rewards are the basis for the authors’ conclusion in the BayernLB Bitcoin report:
“Using Bitcoin’s Stock to Flow Value for May of this year in the model results in a staggering price of $ 90,000 per Bitcoin. Thus, the current price of around 8,000 USD does not take the upcoming Halving effect into account. “
If the assumptions in the report are correct, it the Bitcoin price in 2020 will most likely start to push up as the halving event is approaching rapidly.