Current S&P Correlation Implies Bitcoin at $18K, Says Stock-to-Flow Creator
- Bitcoin price could hit $18,000 if it continues to maintain its positive correlation with the S&P 500, says mysterious analyst PlanB.
- The creator of the popular stock-to-flow model highlighted a 95 percent r-squared correlation between the two assets.
- He added that the global central banks’ unprecedented quantitative easing policy serves as a basis of rallies in both Bitcoin and S&P 500.
Bitcoin may attempt a bull run just below its all-time high of $20,000, according to PlanB.
The mysterious analyst, known for creating the so-called stock-to-flow model, on Wednesday said that bitcoin’s 95 percent correlation with the S&P 500 amounted to a rally towards $18,000. Meanwhile, he predicted a similar outcome for the U.S. benchmark index, stating that it could go to as high as $4,300.
Bitcoin S2F
The statement appeared at a time when bitcoin is trading almost 50 percent below the PlanB’s prediction. The cryptocurrency repeatedly attempted to close above $10,000-$10,500 as a part of its recovery rally from March 2020 lows below $4,000. But it failed to attract adequate buying sentiment in the said top range.
The short-term setbacks, nevertheless, have not deterred PlanB from making aggressively bullish predictions for Bitcoin. The pseudonymous Dutchman uses his benchmark Stock-to-Flow model, a price forecasting tool that values Bitcoin based on its growing scarcity with time.
ICYMI
– #Bitcoin and S&P500 are correlated (95% R2) and cointegrated (so probably not spurious)
– Current S&P level implies BTC $18K (or S&P to go down)
– This is consistent with S2FX model: $288K BTC at S2F56 -> it implies $4300 S&P
– Money printing (QE) pumps both S&P and BTCpic.twitter.com/0iW8WpEpt1
— PlanB
(@100trillionUSD) June 17, 2020
The S2F model expects Bitcoin to hit a $288,000 valuation by 2024.
PlanB applied the same tool to track Bitcoin’s correlation with the S&P 500, noting that both the markets are running higher owing to favorable macroeconomic conditions.
Quantitative Easing
The analyst forecasted growth in demand for Bitcoin as the global central banks implement their unprecedented quantitative easing policies.
In retrospect, the Federal Reserve, the European Central Bank, the Bank of Japan, and others have launched stimulus programs worth tens of trillions of dollars to aid their economies through the COVID pandemic.
Meanwhile, the stock and bitcoin markets are acting as a reservoir that absorbs the new money. The money expects later to overflow into the goods and services sector, where it causes inflation. Informed investors, therefore, are preferring to keep part of their stimulus cheques in hedging assets.
PlanB cited the Bitcoin creator Satoshi Nakamoto to explain his bullish calls. It read:
“Root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but history of fiat currencies is full of breaches of that trust”
“Money printing (QE) pumps both S&P and BTC,” PlanB added.
Bitcoin was trading at $9,500 at the time of this writing.
OhNoCrypto
via https://www.ohnocrypto.com
Yashu Gola, Khareem Sudlow