Bitcoin (BTC) should cost $ 18,000 right now – or the S&P 500 should collapse, says the analyst behind the model, which forecasts a BTC price of $ 288,000.
In a series of Twitter posts on June 17, PlanB, the creator of the stock-to-flow model, highlighted the correlation between the largest cryptocurrency and the stock market.
Bitcoin vs. S&P 500
According to PlanB, Bitcoin and S&P 500 are correlated and jointly integrated, with the value of “R squared” of the pair being 95%.
Such a large correlation suggests that Bitcoin as a dependent variable is extremely susceptible to the movements of the S&P 500.
Pointing out the events in March, when Bitcoin fell in stock and then recovered, PlanB concluded that the current level of the S&P 500 suggests a price of BTC from $ 18,000. The only alternative is for the stock market itself to collapse.
Stock-to-flow forecasts the effectiveness of Bitcoin prices based on the amount of ” new ” coins in circulation compared to the existing supply.
Given that the supply of Bitcoin is unchanged, no matter how much interest there is in cryptocurrency, stock-to-flow theorizes that by 2024 – the next Halving of Bitcoin – BTC / USD will reach $ 288,000 or more.
Is Bitcoin like a stock of super leverage?
While PlanB notes that this connection is nothing new for Bitcoin, the reminder is timely, as it comes during the week in which the flagship cryptocurrency once again shows a tendency to follow the movement of shares.
“The situation is complicated by measures around the coronavirus – quantitative easing or QE, which inflates the money supply, pushing stock prices and Bitcoin up,” he said.
At the same time, there is increasing intervention in the stock markets in the form of artificial competition from central banks, which buy useless shares.
This has led to doubts on the part of commentators, who suggest that the bull market has had to adjust over the past few months – perhaps within the next two weeks.
Then Bitcoin has a long way to go from “separating” from the macro forces.
“Yes, this means that BTC is not an asset that is uncorrelated. As I wrote in a September 2019 post, ‘the real test is a stressful situation’. ” I guess we had one such test with coronavirus: BTC looks uncorrelated,” said another comment from PlanB.
“In fact, BTC seems like a 416-fold S&P position to me (with a -99% stop loss).”