Bitcoin price just set a new yearly high after pushing above $12,000 and may be gearing up for an explosive move higher. The first-ever cryptocurrency may be finally entering a new uptrend.
If this is the case, and the asset continues to follow the stock-to-flow model, Wall Street may be left in shock after having to adjust their chart settings to keep up with Bitcoin’s logarithmic growth.
Institutions Begin Looking Toward Bitcoin As A Hedge Against Inflation
Bitcoin is unlike any other financial asset before it. And while it shares several key similarities with gold, the cryptocurrency existing digitally offers extensive benefits above and beyond the shiny precious metal.
It has no physical footprint, and cannot be counterfeited or duplicated. It is easy to store, simple to move and is highly durable. Most importantly, it is controlled by no third-party or government, and only 21 million will BTC will ever exist.
Its limited, commodity-like supply makes it extremely rare compared to fiat money supply, and therefore an ideal store of value and hedge against inflation.
Wall Street is suddenly taking interest in the asset for this very reason, just as gold broke its all-time high and attracted the likes of Warren Buffett. Hedge fund manager Paul Tudor Jones cast the first stone by comparing Bitcoin with gold and claiming it will be the fastest “horse” in the “race against inflation.”
RELATED READING | BITCOIN BLASTS BACK ABOVE $12,000, SETS NEW HIGH FOR 2020
Others have taken notice. Recently, MicroStrategy, a Nasdaq-listed firm disclosed its purchase of 21,000 BTC – nearly a month worth of newly created BTC – to the SEC. Such a large bite taken out of the supply by just one firm demonstrates just how scarce Bitcoin is.
Several models have been created to attempt to predict the asset’s long-term value based on its scarcity alone. Of these models, Plan B’s stock-to-flow (S2F) model is the most popular and suggests that Bitcoin’s price will soon rise exponentially now that the halving has passed.
If Bitcoin price continues to rise and follow along the S2F model prediction, one analyst says that Wall Street will be so shocked, they may need to adjust their price charts.
I'm not sure Wall Street's ready for what comes next if @100trillionUSD's S2F model continues to be valid.
Most market participants are accustomed to looking at things in linear terms…not log terms. pic.twitter.com/VZ30pc1X5J
— Preston Pysh (@PrestonPysh) August 17, 2020
S2F Model To Cause Wall Street Stock Market Chart Shock
Bitcoin expert Preston Pysh who often shares fundamental insight into the first-ever cryptocurrency, says that Wall Street may not be “ready for what comes next” if BTC continues to follow the S2F model.
The reason being, he says, is that “market participants are accustomed to looking at things in linear terms,” not the log terms that crypto analysts use for long-term BTC analysis.
BTCUSD Linear Versus Log Scale Comparison | Source: TradingView
Bitcoin as a technology has been growing along a logarithmic growth curve, depicting adoption in progress. Therefore, price action in the cryptocurrency is more often than not reflected in log charts, not linear charts like stocks, gold, and other assets.
RELATED READING | BITCOIN’S PRICE IS RISING, BUT DATA SHOWS NO ONE WANTS TO SELL
The above chart shows what BTCUSD looks like in both linear and log scale. Bitcoin’s entire early history is barely a blip on the linear chart. If the cryptocurrency continues along its path laid out from the SF2 model, the asset could some day reach prices of $100,000, to $400,000, and up.
BTCUSD Linear Versus Log Scale Comparison | Source: TradingView
If you think that linear scale made the asset’s prior peaks at $1000 look tiny, wait until you see below what it does to even $20,000 when considering realistic upside targets for BTCUSD.
Even at just a glance, it’s clear to see why Wall Street might be shocked to see an asset that charges up a linear price chart so quickly. A simple click or two should do the trick and get their analysis sorted, however, not before initial shock sets in.
Featured image from Unsplash.