German state bank: Bitcoin rate becomes $ 90,000 in 2020

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Positive sounds from an unexpected angle. According to the German state bank BayernLB, the bitcoin price could rise to a whopping 90,000 dollars in 2020. This is apparent from a report that the bank shared on 1 October. Bitcoin is compared with gold and silver in the report (PDF).

Predict the bitcoin rate with the stock-to-flow model

BayernLB does not just come to this number. The bank uses the so-called stock-to-flow model to predict the price of bitcoin. This model is often used with raw materials such as gold and silver, but can also be applied to bitcoin.

With this model you can estimate the price of a good. The stock-to-flow model takes into account, among other things, scarcity, but also the effort associated with production. Gold is scarce and difficult to extract. Bitcoin is programmed to be scarce and is difficult to mine.

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The idea of ​​applying stock-to-flow to bitcoin comes from Saifedean Ammous, author of the book The Bitcoin Standard. Twitteraar Plan₿ then worked out the model on bitcoin:

#bitcoin halving .. 7 months to go ?

Btc slightly below stock to flow model.
I guess no front-running the halving (yet)! pic.twitter.com/IfRamOJM7X

– Plan₿ (@ 100trillionUSD) October 1, 2019

$ 90,000 in 2020

The stock-to-flow model takes into account that bitcoin is becoming increasingly difficult to produce. And you can say that, next year the bitcoin block halving will take place. At that moment, less bitcoin is released per transaction block and new bitcoin becomes scarcer.

The bitcoin block halving can then influence the price. Less supply of new bitcoin and an equal demand can cause the price to rise to 90,000 dollars in 2020. That is, if bitcoin continues to follow the model.

At the time of writing, that seems a long way off, last week the rate dropped to 7,000 euros. Bitcoin now appears to be stabilizing at around 7,500 euros.

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