If you are a Bitcoin investor or have converted your savings into this Cryptocurrency, it is very likely that you have done so due to the high returns expected with this currency, but it is no secret to anyone about the risk involved in investing in Bitcoin or at least those who invest should know it; and it is that being a Cryptocurrency where you can speculate in a very coarse way with the price we forget that it is also one of the assets with the highest volatility.
This volatility in the price of bitcoin is already part of the nature of the Cryptocurrency ecosystem except for a few. And it is that in its early years the price for each BTC used to vary around 15%, if daily returns were taken into account in a period of 30 to 60 days, currently these variations tend to be more dramatic due to the increase in the price of this digital currency in recent years.
If we think about it, many of the detractors of Bitcoin have assured that the price of this currency will end up reaching zero, since they say that it is a complex economic bubble, while the defenders say that there is no fixed limit on the price of this currency. And the truth is mere speculation on both sides, very few dare to postulate any study or model that can predict or allow analysis of the prices of Cryptocurrencies such as Bitcoin, but recently there has been talk of a model called Stock to Flow.
The idea for a Stock of flow model for Bitcoin was created by an anonymous Twitter user whose pseudonym is PlanB, where he proposed and gave an example of how the Bitcoin price would work under this model; This user claimed to be an institutional investor of Dutch origin with various legal and financial studies, which allow him to manage about $100,000 million dollars in investment fund assets.
The model devised by PlanB consists of calculating a ratio or estimate based on the existing supply of an asset compared to the amount that enters the market each year for that asset. Where the higher this ratio is, the longer production will take to meet existing demand and the scarcer the good will be.
As we mentioned before, the Stock to Flow model allows you to create an estimate of the future price of a Cryptocurrency such as Bitcoin, using some of the characteristics of this currency such as the limit of 21 million units, it also takes into account the halvings that occur around of every 4 years and the reduction of the mining reward.
The graph generated by the stock-to-flow in Bitcoin is used by many people to predict the future price of this Cryptocurrency. Even according to several of the results made by different users on the internet following the real data of Bitcoin, they have estimated that this Cryptocurrency reaches a price of 1 million dollars in 2030, which many other personalities such as Vitalik Buterin have criticized since, like many other people believe that the model is misguided and does not take into account some of the other features also present in Bitcoin.
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It is impossible for the Stock to Flow model to be implemented with other Cryptocurrencies since not all of them have an issuance limit, since there are currently digital assets that do not have a limit, therefore it is unlikely that this model can be implemented .
It is an interesting model, but at Ccoins we always alert our users to create their own criteria when investing in Crypto assets and investigate on their own, remember that all investment in digital assets must be made once a study has been carried out or analysis to the asset that we wish to acquire.
We cannot affirm that this is true or false, but taking into account that Bitcoin began with a value of less than a dollar, anything can be possible, but we must always be cautious and avoid investing in a Cryptocurrency with exaggerated speculation as the main premise.
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