Why the Price of Bitcoin Will Surge to $55,000 After This May 2020 Catalyst Increases Its Scarcity

Bitcoin - the world's first and only decentralized cryptocurrency - has a market cap of $170 billion.

That means the market values Bitcoin just as much as it values Citigroup Inc. (NYSE: C), which is worth $170 billion at the time of writing (Feb. 1, 2020).

Citigroup has a CEO, 204,000 employees, 200 million customers in 160 countries, and public financial statements that show it profited $19.4 billion in fiscal 2019.

Bitcoin has none of these things.

You can't value it using traditional financial metrics like the price/earnings ratio or the debt/equity ratio.

That's because Bitcoin isn't an "income-producing business" with earnings or debt. There are no "future cash flows" to estimate and discount back to the present to calculate the intrinsic value of this technology.

But that clearly does not make Bitcoin worthless...

You just need a different method to value the cryptocurrency.

Today, we'll show you how to value Bitcoin using a different model - one which allows us to compare its value to other scarce assets like silver ($308 billion market cap) and gold ($8.4 trillion market cap).

You see, Bitcoin should be compared to these precious metals, since they also aren't income-producing businesses, yet they hold significant value in this world because they're also limited in supply and unforgeable.

To date, this model has correctly explained 95% of the price of Bitcoin within two standard deviations of its projected mean.

And it predicts Bitcoin's market cap will surpass $1 trillion (or $55,000 per Bitcoin) by 2021.

Why Bitcoin Could Hit $55,000 by 2021

If you buy Bitcoin, your best chance of making money is to hold it and never sell.

Two of the most common mistakes Bitcoin investors make include:

  1. Not buying more at a lower price.
  2. Selling any (because the price has inevitably gone higher.)

Understanding the Bitcoin stock-to-flow model is the first step to understanding why these mistakes are true.

Highlighted by Saifedean Ammous in his highly regarded book, "The Bitcoin Standard: the Decentralized Alternative to Central Banking," the stock-to-flow model has been 95% accurate in predicting the price of Bitcoin - back-tested through its inception in 2009.

Recently, the model has been popularized by an anonymous quantitative investment manager known as "PlanB."

The public does not know this gentleman's real identity. But we do know he resides in Amsterdam and manages billions of dollars for his clients.

We also know that his work on the stock-to-flow model has been tested by some of the smartest quantitative investment managers in the world...

And nobody has been able to disprove its accuracy.

The big question, though, remains: Will the model hold true throughout 2020 and beyond?

Only time will tell.

But since it's not broken yet, you simply can't ignore Bitcoin any longer.

The Bitcoin Stock-to-Flow Model Explained...

First, we need to define what "stock" and "flow" mean to the model.

"Stock" is the total number of Bitcoin that exist in the world today. At the time of writing (Feb. 1, 2020), there are 18,195,075 Bitcoin stored in the memory of tens of thousands of nodes throughout the globe.

"Flow" is the number of new Bitcoin mined per year.

At its current mining schedule, 12.5 new Bitcoin are added to the market approximately every 10 minutes. That means a maximum of 657,000 new Bitcoin will come to market over the course of 365 days (at current maximum allowed production levels).

To calculate the stock-to-flow of Bitcoin, simply divide all the Bitcoin that exist in the world by the number of Bitcoin that will be mined in one year.

So, 18,195,075 / 657,000 = 27.7. Bitcoin's stock-to-flow is 27.7.

That means it would take 27.7 years of mining Bitcoin at its current production rate to double the supply of Bitcoin in the world.

As you'll see in the next section, this means that today, Bitcoin is slightly more scarce than silver and slightly less scarce than gold.

Since Bitcoin is more scarce than silver, it should be worth more than all the silver in the world ($308 billion). But it's not, so one could argue that Bitcoin is currently undervalued for this reason.

And since Bitcoin is less scarce than gold, it should be worth less than all the gold in the world ($8.4 trillion). But by 2022, Bitcoin will be more scarce than gold, so one could argue that it could soon be worth hundreds of thousands of dollars, then millions per coin...

The Stock-to-Flow of Silver and Gold

Approximately 550,000 tons of silver exist in the world today. And 25,000 new tons are mined every year.

So, silver's stock-to-flow ratio is 550,000 / 25,000 = 22.

It would take 22 years of mining silver at its current production rate to double the supply of silver in the world.

Now, for gold...

Approximately 185,000 tons of gold exist in the world today. And 3,000 new tons are mined every year.

So, gold's stock-to-flow ratio is 185,000 / 3,000 = 62.

It would take 62 years of mining gold at its current production rate to double the supply of gold in the world.

Remember how we said it would take 27.7 years of mining Bitcoin at its current production rate to double the supply of Bitcoin in the world?

Well, that number is about to double overnight on May 12, 2020.

And based on the stock-to-flow model, that's when the price of Bitcoin should really start taking off...

How Bitcoin Is Different from Silver and Gold

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Once the prices of gold and silver rise, miners of these precious metals will mine more of them. And there's no limit to the number of companies/people who can and will do so.

As a result, the prices of gold and silver generally come right back down as their "flow" increases.

With Bitcoin, you can't do that.

More Bitcoin miners will undoubtedly turn on their machines to begin profiting, but that doesn't mean more than the maximum allowable amount of new Bitcoin will reach the market.

You see, there's a difficultly adjustment algorithm built into Bitcoin that limits the number of new Bitcoin that can be mined per 10 minutes.

It's called the "halving." And it occurs every 210,000 blocks (approximately every four years).

During the halving, the maximum number of new Bitcoin able to be mined per year is cut in half overnight.

So, on May 12, 2020, Bitcoin's stock-to-flow will double overnight to about 56 (very close to gold's 62).

And by 2022, Bitcoin's stock-to-flow ratio will overtake that of gold - meaning Bitcoin will be more scarce than gold and its $8.4 trillion market cap.

It's because of this scarcity principle, PlanB argues, that there is a high probability the next Bitcoin bull market will start after the May halving.

If demand for Bitcoin remains the same while new supply to the market is cut in half, the price will begin to rise.

This is supported by the power logarithmic function PlanB built into his stock-to-flow model. It has been 95% accurate (within two standard deviations of the mean) to date, and nobody has been able to mathematically disprove its results.

After the May 2020 halving, the stock-to-flow model predicts the price of one Bitcoin will be worth anywhere from $10,000 to $120,000 by 2021.

Its mean target, however, is $55,000 (which would give it a $1 trillion market cap).

You can see it clearly in the chart below:

As you can tell from the chart, the 12-to-18-month periods following past Bitcoin halvings is when previous bull markets have ensued.

After the first halving from 50 Bitcoin per block to 25 in November 2012 - when one Bitcoin was trading around $11 - it jumped as much as 11,136% to $1,236 in December 2013.

After the second halving from 25 Bitcoin per block to 12.5 in July 2016 - when one Bitcoin was trading around $650 - it jumped as much as 2,960% to $19,891 in December 2017.

That's why, even if Bitcoin is only trading for $10,000 after it "halves" for the third time from 12.5 Bitcoin per block to 6.25 on May 12, it's not unreasonable for it to jump a mere 450% to $55,000 by 2021.

DON'T MISS THIS BITCOIN OPPORTUNITY: Even a $100 investment could mean 10x returns

PlanB thinks the money needed to drive Bitcoin to the $1 trillion market would come from "silver, gold, countries with negative interest rates (Europe, Japan, U.S. soon), countries with predatory governments (Venezuela, China, Iran, Turkey, etc.), billionaires and millionaires hedging against [quantitative easing], and institutional investors discovering the best performing asset of the last 10 years."

PlanB is saying that silver and gold investors are increasingly more likely to trade in their precious metals for Bitcoin as it becomes twice as scarce after each halving.

And for what it's worth, if the model holds true after this third halving, it will be really interesting to see what happens in the 12-18 months after the fourth halving from 6.25 to 3.125 Bitcoin per block.

That's because, with a stock-to-flow of 120, Bitcoin will be about twice as scarce as gold. And the model predicts one Bitcoin will be worth $1,000,000, giving it a $20 trillion market cap.

Why Right Now Is the Best Time to Buy Bitcoin

If the stock-to-flow model is able to predict the price of Bitcoin with 95% accuracy over the next five years, most people will never be able to afford one Bitcoin.

Only 21 million Bitcoin will ever exist by the time they're all mined around the year 2041.

With 46.8 million millionaires owning $158.3 trillion of $360 trillion worth of the world's wealth, it's impossible for them to all own more than one Bitcoin at the same time.

While $9,320 may "seem" like a high price to pay today for one Bitcoin, it's actually quite small when you consider its $170 billion market cap only makes up 0.0472% of all the money in the world (and 2% of all the physical gold in the world).

Remember the two most common mistakes Bitcoin investors make:

  1. Not buying more at a lower price.
  2. Selling any (because the price has inevitably gone higher.)

And when you're ready to buy Bitcoin, just remember you can start small, putting as little as $0.01 in at a time (every Bitcoin can be broken down into "satoshis," or 0.00000001 bitcoin).

Something as little as 1% of your paycheck could make a huge difference just five years down the road. Heads you win big, tails you don't lose much.

In the words of Satoshi Nakamoto: "It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy."

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