- Bitcoin’s current value represents just 0.2 of its potential according to the stock-to-flow model, indicating significant room for growth.
- Long-term holders currently possess 75% of circulating Bitcoin, hinting at anticipation for the forthcoming halving in April 2024.
The Calculus of Bitcoin’s Scarcity
The interplay between Bitcoin’s scarcity and its intrinsic value has consistently fascinated and bewildered the crypto sphere. Throughout its volatile history, myriad models have emerged, attempting to shed light on this intricate relationship, guiding investors through the labyrinth of crypto economics.
Decoding the Stock-to-Flow Deflection
Delving into this, the stock-to-flow (S/F) deflection is a notable metric. Simply put, it gauges if an asset, like Bitcoin, is valued appropriately given its scarcity. A recent pulse-check by Glassnode, a leading on-chain analytics firm, revealed that Bitcoin’s S/F deflection touched a one-month nadir. This dip strongly alludes to potential bullish swings on the horizon.
To elucidate, the S/F deflection is birthed by juxtaposing Bitcoin’s current price against its S/F ratio. This model, crafted by the enigmatic analyst, PlanB, pits Bitcoin’s existing stockpile against the annual influx of newly minted coins.
The ethos anchoring this model is straightforward: an asset’s valuation should mirror its rarity. Thus, a heightened ratio signals escalating scarcity, which theoretically, should steer the price northward. This hypothesis becomes even more pertinent when considering Bitcoin’s quadrennial halving events, where the influx of fresh coins takes a 50% hit. Glassnode’s data illuminates this dynamic, underscoring the dormant BTC price pre-halving, which, post-event, catapults to unprecedented peaks.
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Currently, a compelling discrepancy exists: Bitcoin’s market price is a mere fifth of what the S/F model prophesizes. With the clock ticking down to the next halving in April 2024, the market teems with speculation that Bitcoin might soon realize its latent potential.
Anticipation Brews Among ‘Diamond Hands’
This projected upswing has magnetized long-term Bitcoin aficionados, colloquially termed ‘diamond hands’, prompting them to augment their BTC caches. As of now, these crypto stalwarts hold a whopping 75% of Bitcoin’s circulating volume.
To provide a market snapshot, Bitcoin recently rebounded past the $26,000 threshold as of August 19, trading at $26,108 at press time, according to CoinMarketCap’s metrics. As the crypto-verse watches with bated breath, the approaching halving event promises to be a pivotal juncture in Bitcoin’s evolutionary saga.
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