The German bank Bayerische Landesbank this Tuesday presented a new analytical document, in which compared the policy of issuing bitcoin with the release of various precious metals. According to the authors, the ratio of already issued assets to newly entering the market (stock_to_flow – ratio or S2F) can serve as a clear indicator for determining their “hardness”.
Bitcoin’s emission value is not subject to change, which makes cryptocurrencies look like gold, experts from BayernLB notes. At the same time, gold has got a high S2F ratio for thousands of years of its existence, while it was originally laid down in the bitcoin code. The authors declare that the substantial superiority of the existing offer over the new issue of an asset is the preferred characteristic for a cash exchange commodity.
For example, palladium has a low S2F ratio, since in its case the available offer is small relative to the new release. Thus, it cannot fulfill the function of money, since an existing proposal can easily be diluted with a new one.
According to the authors, the fact that bitcoin is mostly in demand as a monetary asset is an advantage for analysis, as it makes the S2F model more accurate and does not cause sudden changes in demand from market participants that could use it for other purposes.
Analysts also mention two upcoming halving of the largest cryptocurrency, predicting that as a result of these events, the S2F bitcoin ratio will fall below gold levels: “If in May 2020 the S2F bitcoin ratio fits into this model, a dizzying price of $ 90,000 will form. This will also mean that the upcoming halving was hardly reflected in the current bitcoin price of about $ 8,000 (according to the model, the price should be about $ 7,500). ”
BayernLB was founded in 1972 and is the seventh largest bank in Germany, controlling assets totaling € 220 billion.