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The “Plan B” valuation model for the development of Bitcoin’s price quickly gained worldwide attention. In it, the price of Bitcoin is modelled with the “stock-to-flow ratio”, a proxy for scarcity. Historically, the stock-to-flow ratio was an almost perfect exogenous regressor for the development of the price of Bitcoin (R2 was 95%). How Plan B works 'Plan B consists of a progestin-only hormone called levonorgestrel, which is a synthetic version of progesterone, a naturally occurring hormone in our body,' says Bender. 'It's one pill of 1.5 milligrams of levonorgestrel that you take one time as soon as possible after an act of unprotected intercourse.'
Source: UnsplashPlan B is sticking to his S2F model based prediction of $100k-$288k before December 2021. Despite several updates and announcements on the regulatory and institutional front, he stands by the $100k. Though there are several Bitcoin Maximalists on Crypto Twitter calling for Bitcoin $100k by end of 2020, PlanB stands out with his prediction because it is backed by a model and he’s got time.
December 2021 is 13 months away. 13 months is enough time for Bitcoin’s price to pass through 3 phases of the market cycle. $100k doesn’t sound unrealistic with the component of time involved.
He is quoted saying that more and more BTC is being moved to deep cold storage. When there is a correction or the price drops below the recent high, there are hundreds of small 0.01 BTC also buys on exchanges for whales to round up the BTC sold by weak hands.
Stock To Flow Model
Source: Twitter
When Bitcoin is stored away in cold storage or private wallets, the supply drops. Additionally, this occurs within a few months of the halving and that is known to cause a supply shock. The slow accumulation of supply shortage drives a bull market in the next 18 to 20 months. Traders who have traded for over four to five years are familiar with this effect, when the 2012 and 2016 halving led to the 2013 and the 2017 bull run respectively. The 2020 halving is well on track for the same, 6 months in and the price is already above $15000.
Once supply shortage is significant, the supply that is being sold demands a higher price, and it naturally drifts upwards. This was the case, in the first week of November when charts showed a BTC sell wall, with virtually no BTC left to sell. Nine months into the halving, nearly 100% HODLers would be sitting on profits and the sell-side pressure may build up. Spot exchanges may be flooded with BTC for sale, and the price may continue to increase, driving retail and institutional interest and generating new demand.
When this demand is absorbed, and new demand is consistently generated, HODLers and miners’ willingness to sell may drop. Waiting for the next big price move to book unrealized profits, HODLers may choose to sit on their assets for a few weeks to months. Once the price accelerates high enough, a mania like phase will erode the price and the demand.
Since this price action and the market cycle phases described above, all of them started in May 2020, they stretch all the way to May 2021. Based on Plan B’s S2F, the price will continue an upward trend even after.
Bitcoin Twitter Plan B
Bitcoin’s halving narrative and the market cycle phases have supported the price growth and momentum until now. This may be the reason for Plan B’s unwavering confidence in Bitcoin to $100k-$288k before December 2021.
Ekta is a full-time journalist at AMBCrypto and her specialization lies in spot markets. Currently pursuing her MBA, she is passionate about trading, fintech, and everything decentralized
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