Analysts at Hedgeye Risk Management, an investment research and financial media company based in Stamford, Connecticut, analyzed the arguments for Bitcoin stock flow. The framework indicates that by the second half of the 2020s, the price of Bitcoin may reach US$1 million, and by the 2030s, the price of each BTC may reach US$10 million.
“First they ignore you, Then they laugh at you, Then they fight with you, Then you win” -Mahatma Gandhi
At its most recent peak, Bitcoin’s market value reached 1.2 trillion US dollars.Give you some thoughts, this is bigger than the four major banks in the United States merge (JP Morgan Chase, Bank of America, Citi, Wells Fargo), and the four major payment platforms (Visa, MasterCard, PayPal, Square).
As most long-term holders understand, the convergence of key factors will continue to contribute to the global popularity of cryptocurrencies.
- Companies that accept payments in cryptocurrencies
- Institutions holding cryptocurrencies on the balance sheet
- Asset management companies create new investment vehicles (At the time of writing, there are eight fund management companies pending Bitcoin ETF applications)
- Depreciation of the dollar
- Increasing distrust of centralized political and monetary institutions
The list is endless.
Hedgeye Risk Management is an investment research and financial media company based in Stamford, Connecticut. Its analysts analyzed the argument from Bitcoin stocks to flow-this is consistent with their method of observing financial markets Quantitative Shots (obviously no qualitative, narrative-based “calling”).
The framework indicates that the price of Bitcoin may reach By the second half of the 2020s, it will be 1 million U.S. dollars, and by the 2030s, each BTC will be as high as 10 million U.S. dollars.
Hedgeye was founded in 2008 by a former buy-side analyst to democratize daily investors’ access to hedge fund quality investment research. In order to expand the scope of its research process, Hedgeye’s macro team created a detailed daily quantitative dashboard for a series of cryptocurrencies and ETFs, appropriately named “Bitcoin trend tracker“.
This “Crypto Quant” dashboard breaks down 1) price, 2) trading volume and 3) volatility among several other indicators for each asset it tracks. (You can watch the 30 minutes of Hedgeye Macro analyst Christian Drake Explanation video on how to use the tracker Here).
The goal is simple: provide investors with high-quality quantitative data on cryptocurrencies that can be used in other asset classes, reflecting the reality of cryptocurrencies Stay hereThe “Bitcoin Trend Tracker” is no different from Hedgeye’s other proprietary tools, which use market-based signals to stay ahead of any significant changes in assets.
In addition, Josh Steiner, an analyst at Hedgeeye, also conducted a Fundamental analysis By comparing Bitcoin’s Stock-to-Flow model with other hard asset models, and comparing the evolution of Bitcoin price with the Stock-to-Flow framework. The following is a summary of the analysis.
What needs to be clear is that there are many legal risks in long Bitcoin, which is self-evident. Smart investors need to be aware of these risks. They cover all areas, including potential regulatory risks as well as competition and technology risks. Anyone who owns Bitcoin (or any cryptocurrency related to it) needs to be aware of these potential mines and manage their risks accordingly.
(You can access the slides in this article here)
“The idea here is simple,” Steiner explained.
“If you look at the ratio of the outstanding supply to the flow of that supply, you can get the inventory-to-flow ratio. Bitcoin’s Inventory to flow The ratio is currently 54 times; approximately 344,000 BTC are mined each year, but the unfinished base is approximately 18.6 million BTC.
But the extraordinary thing about Bitcoin is that it has a pre-programmed creation-recession approximately every 4 years; in each of these events, the reward for mining Bitcoin will be halved.
this means Inventory to flow The ratio is expected to increase logarithmically, approximately 10 times every 12 years.
From this perspective, by 2036, we should be in Inventory to flow Approximate ratio 1000 times – Or more than 10 times the stock-to-flow ratio of houses (93x) or gold (72x).By 2048, there will be another 10-fold increase, which will require Inventory to flow depending on 10,000 times. “
In simple terms, Bitcoin is mathematically designed to increase its Inventory to flow Until it finally converges to infinity mathematically. This is not only related to its current state, but also to other hard currency assets such as housing and gold. A higher inventory-to-flow ratio indicates that there is less new supply entering the market relative to the existing outstanding supply of assets.
In other words, compared with other assets, assets with a higher stock-to-flow ratio should be able to better maintain their value for a long time. In the world of loose money and depreciation of the dollar, it is easy to understand that the attractiveness of Bitcoin is not only a hard currency asset, but also a super hard currency asset. Unlike real estate and gold, which have high but relatively static stock flow multiples, Bitcoin’s stock flow ratio will increase exponentially in the next 100 years.
Steiner returned to the lasting problem mentioned earlier, namely the impact on prices.
In the figure below, Steiner plots the Bitcoin price (y-axis) versus Inventory to flow The ratio changes over time (x-axis) to 2057. Perhaps most importantly, the black dots in the chart on the right reflect the theoretical progress implied by the ratio of historical Bitcoin price to stock flow… So far, it has followed the model very closely.
With more than two decades of investment analysis, Steiner uses every regression analysis in the book to simulate the future price of Bitcoin. So far, the most suitable method is the power function. The graph shown is logarithmic; Bitcoin’s price appreciation has always been-and may continue to be-logarithmic.
“Bitcoin every 10 times increase Inventory to flow The rate that will occur every 12 years in the future has increased the price of Bitcoin by about 1,000 times. And this situation did not happen once, but twice. “
Steiner explained that even after decades of careers in finance, housing, and macroeconomics for Wall Street buyers and sellers, he hasn’t seen another asset behave in this way.
In the spirit of complete transparency, Steiner did not keep his model secret.The theoretical development equation of Bitcoin price (relative to its Inventory to flow) Yes y=1.3268x2.4769.
This equation predicts that Bitcoin will reach 1 million U.S. dollars in the second half of the 2020s, and each BTC will reach 10 million U.S. dollars by the end of the 2030s.
of course, Inventory to flow Is not as long as Factors that will affect the price of cryptocurrencies in the future.The goal of the model is to prove how Bitcoin Essentially These price levels can be reached.
In addition, not everyone plans to become a long-term holder of cryptocurrency. Many people use encryption in various transactions, or store value in many other use cases but realize benefits later.
Hedgeye’s goal is to add a quantitative framework for short-term traders and long-term investors to invest in cryptocurrencies.
Investors can now better understand the short-term and long-term changes and relevance that have changed the recent trajectories of various cryptocurrencies and crypto-related ETFs. In other words, Hedgeye is injecting transparency into a huge asset class that may one day be comparable to stocks, fixed income and foreign exchange.
This Bitcoin trend tracker This is exactly what it does.
As a risk management tool, it focuses on the price, quantity, volatility and related characteristics of each asset it tracks. It is managed by the Hedgeye Macro team and is constantly evolving based on the new models they develop, subscriber feedback, and innovations in encryption technology.
Dazzling Bitcoin trend tracker Including Hedgeye CEO Keith McCullough’s proprietary, buy low and sell high risk range Bitcoin, Ethereum, This Grayscale Bitcoin Trust (GBTC) and Micro strategy (MSTR)… Except for other key encrypted quantitative risk management data, you will not be able to obtain it anywhere else.
Recently, Hedgeeye has expanded its encryption coverage through proprietary risk coverage, Enlarge the transformation data sharing ETF (Big chunks).
Bottom line: You can now use the “Bitcoin Trend Tracker” to access key crypto risk management signals.
Get more information about Hedgeeye Bitcoin Trend Tracker Here.
Learn more about Hedgeye’s overall investment research process Here.
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