Predicting the price of Bitcoin in 2025 accurately is a very difficult task. However, many analysts and crypto believers see Bitcoin above $100K (₹ 74 lakh) and can even reach over $200K (₹ 1.48 crore) in the next five years.
So, why are they so bullish on Bitcoin and how are they arriving at the numbers?
They are basically focusing on the popular stock to flow (S2F) price model, which forecasts the price activity based on the current stock of Bitcoin against the flow of new Bitcoin.
You can find many theories and models suggesting the price of Bitcoin, but to-date, it provides the most accurate estimate.
Understanding the Scarcity and S2F Price Model
Precious metals like gold derive its value due to scarcity and low-rate of supply ensures it maintains its value, the reason why central banks prefer to hold it in sizeable quantities.
Therefore, its high stock-to-flow ratio provides it with the feature of lowest price elasticity of supply.
Bitcoin also shares the same features. For instance, the stock of Bitcoin in 2017 was 25 times larger than new coins mined in that year, which makes the S2F ratio 25.
Meaning, at the current production rate, it would take 25 years to mine the current level of stock. Still lower than gold which is at 62.
However, after the recent Bitcoin Halving that occurred on May 11th 2020, the S2F ratio climbed to 52 and in the following halving, it will be around 113. Much higher than gold and difficult for gold to match.
Stock-to-Flow Ratio of Precious Metal
Halving has a big significance on the flow rate of Bitcoin and higher the stock-flow ratio, it will translate into a higher price of the asset.
Stock Flow Chart of Bitcoin
As per the stock-flow ratio chart of Bitcoin, the price of Bitcoin is expected to reach $100K (₹ 74 lakh) by 2024.
Source: Coinmetrics
The above chart further strengthens the theory as after each halving event in the past, Bitcoin has made a new peak within 1.5 years. With accelerated mainstream adoption and emergence of new-age crypto exchanges that allow quick access to the crypto market, Bitcoin will continue to attract investors and rise in value.
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