PlanB, the pseudonym for a Dutch Bitcoin enthusiast on Twitter, had been a traditional investor for over two decades when he took an interest in Bitcoin.
One thing that frustrated him about Bitcoin was that there wasn't a proper valuation model. So he created what is now known as the stock-to-flow (or S2F) model, which is commonly used with commodities and now has fairly accurate predicted Bitcoin's price since it was published back in 2019 -- plus given him more than a million Twitter followers.
He cross-referenced other scarce assets such as gold, real estate, silver, and diamonds and found a linear relationship between the scarcity and the market value of those assets. "It gave me a rough indication the Bitcoin should be worth somewhere in between silver and gold, going towards gold," he said on the latest episode of my podcast, Unchained.
For instance, back in June, he tweeted that the Bitcoin price in August would reach over $47,000, that in September, it would exceed $43,000, and in October, it would surpass $63,000 -- all of which turned out to be accurate.
He explains how Bitcoin reached its $1 trillion market cap, which it has now surpassed and says, "We should go a lot higher," based on the market capitalization of gold.
One of the drivers of this week's price surge was the start of trading on Monday of the ProShares' Bitcoin futures ETF. This happened despite the fact that the ETF is based on Bitcoin futures, which are basically bets on how the price of Bitcoin will trade. Such an investment product isn't as good of a vehicle as a spot Bitcoin ETF, whose underlying asset would be actual Bitcoin. PlanB explains how a Bitcoin futures ETF is now trading at a 10% premium to spot Bitcoin, which then cuts into the profits of Bitcoin futures ETF investors.
But overall, he says that the pandemic and all the ensuing money printing by the Federal Reserve and other central banks have helped push the Bitcoin price up from the less than $5,000 hit to which it dropped when the pandemic hit in March 2020.
Additionally, he says, China's move to ban Bitcoin mining and also more stringently enforce restrictions on trading crypto there have also been beneficial for the Bitcoin network, eliminating the threat that the Chinese government could have posed to Bitcoin. For instance, last year when the percentage of Bitcoin mining being done in China was 67%, the Chinese government could have taken over the miners located in China, which would have enabled it to perpetrate a so-called 51% attack on the network, in which it would try to commandeer the network and change previous transactions or make fraudulent transactions. It's now 0%, while the US has taken the lead at 35%, as of August.
Check out the full episode to learn:
what PlanB's projections are for the Bitcoin price in November and December
why PlanB disagrees with people who believe Bitcoin will not see major drawdowns of 50-80% again
when he believes Bitcoin will enter the so-called "super cycle," in which it no longer sees such large drops in price until the next Bitcoin halving
If you liked what you read: