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After Recovery To $10,000, Bitcoin ‘Should Hit $100,000 In 2021’

After Recovery To $10,000, Bitcoin ‘Should Hit $100,000 In 2021’

Bitcoin has had a roller-coaster week, with crypto market watchers on the edge of their seats for more wild price swings.

The bitcoin price dropped like a stone on Thursday, falling to five-month lows of just over $7,000 per bitcoin, only to bounce back to over $10,000–enlivening what had been a stagnant market and leaving analysts scratching their heads as to the cause of the extreme volatility.

Ahead of bitcoin’s sudden market moves this week, bullish bitcoin speculators had remained confident the market will explode over the next couple of years, with the big rebound further emboldening investors–and chasing away bitcoin bears, at least for now. Earlier this week, widely-respected bitcoin analyst PlanB, who created the so-called stock-to-flow bitcoin pricing model, reiterated his expectation that bitcoin will hit $100,000 before Christmas 2021.

“Somewhere between and year and a year-and-a-half after the [May 2020] halving, so say before Christmas 2021, bitcoin should be, or should have been above $100,000,” PlanB told Global Macro Investor founder Raoul Pal. “If that’s not the case, then all bets are off and [the model] probably breaks down. I don’t expect that to happen.”

The stock-to-flow pricing model calculates a ratio based on the existing supply of an asset against how much is entering circulation.

Commodities such as gold–with the largest stock-to-flow ratio of 62, meaning it would take 62 years of gold production to get the current gold stock–have a higher stock-to-flow ratio and are valued by investors for their scarcity. Silver has the second-largest stock-to-flow ratio with 22 years for its production to reach the current silver stock.

Bitcoin currently has a stock-to-flow ratio of 25 though the model sees this increasing to 50 following the scheduled 2020 bitcoin halving. In May next year, unless the bitcoin network computing power radically changes, the coin reward for mining new bitcoin blocks will drop from 12.5 bitcoin to 6.25 bitcoin–cutting the supply of new bitcoin coming onto the market by half.

Earlier this year, Morgan Creek Digital co-founder Anthony Pompliano similar predicted bitcoin will hit $100,000 by the end of 2021, pointing to looser monetary policy from the world’s central banks and bitcoin’s next halving as a “perfect storm”–though not everyone agrees.

Following bitcoin’s spike yesterday, those in the bitcoin and crypto industry were quick to jump on recent developments as an explanation for bitcoin’s uptick.

“I do think Mark Zuckerberg’s testimony got a lot of people worried of a bigger retaliation from regulators, but after most of the questioning had nothing to do with cryptocurrency or libra and with reports of China premier Xi describing blockchain as a ‘rule of law network’–spirits have risen and the bull is back,” said Alex Mashinsky, chief executive of New York-based crypto lending platform Celsius Network.

China’s president President Xi Jinping said on Thursday that the country should “seize the opportunity” of bitcoin’s blockchain technology, taken by some that China could ease its strick bitcoin and crypto restrictions.

Ahead of Xi’s comments, Facebook’s chief executive Mark Zuckerberg was savaged by U.S. senators over his plans for a bitcoin rival, dubbed libra, leaving crypto investors with fresh fears there could be a global crackdown on bitcoin and other digital tokens.