BTC Price Prediction: Analyzing Bitcoin’s Profit Potential Post-Halving
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Jurrien Timmer, Director of Global Macro at Fidelity Investments, offers a nuanced analysis of Bitcoin’s future trajectory, particularly in comparison to gold.
Bitcoin vs. Gold
Timmer begins the analysis by estimating the share of gold held for monetary purposes, excluding jewelry and industrial usage. Drawing data from the World Gold Council, he suggests that monetary gold constitutes approximately 40% of the total above-ground gold.
Timmer proposes that the potential market share of Bitcoin can capture around a quarter of the monetary gold market, with the latter valued at approximately $6 trillion and Bitcoin’s market capitalization at $1 trillion.
Bitcoin Halvings and Diminishing Returns
Historically, Bitcoin halvings have played a pivotal role in influencing its price. However, Timmer introduces a hypothesis suggesting diminishing returns from future halvings. By comparing the outstanding supply and incremental supply of Bitcoin to gold, Timmer illustrates how the diminishing impact of halvings could become more pronounced in the future.
So, let’s see if we can find a way to “bend down” this exponential S2F curve to reflect the likely diminishing returns of future halvings. One way is to overlay the asymptotic supply curve (percentage of coins mined relative to final supply cap) against the S2F curve. Let’s call… pic.twitter.com/VsX0ryANqo
— Jurrien Timmer (@TimmerFidelity) February 22, 2024
To address the potential diminishing impact of halvings, Timmer has represented the market dynamics with a modified Stock-to-Flow (S2F) curve. This curve, derived by overlaying an asymptotic supply curve onto the original S2F curve, aims to capture the changing dynamics of Bitcoin’s supply. Timmer utilizes a regression formula, incorporating the initial S2F curve and the asymptotic supply curve, resulting in a modified S2F curve that aligns more closely with the supply characteristics of gold.
Using the modified S2F model and considering the supply characteristics of gold, Timmer generates hypothetical price projections for Bitcoin.
These projections, signalling a potential price of approximately $100,000 by the end of 2024, present a scenario in which Bitcoin’s scarcity advantage continues, but its impact on price gradually diminishes over time.
Timmer concludes by emphasizing that if Bitcoin were to capture a quarter of the monetary gold market, it would signify a substantial shift in the global distribution of wealth. This shift could gradually propel Bitcoin’s price upward over the coming years, reshaping the dynamics of the cryptocurrency market.
Summarising his analysis …
Jurrien Timmer’s analysis provides a thought-provoking perspective on Bitcoin’s future, incorporating considerations of halvings, market share relative to gold, and modified S2F curves. Timmer’s insights contribute to the ongoing discussions around Bitcoin’s role in the global financial ecosystem.
Filed under: Bitcoin - @ February 25, 2024 9:09 am