Bitcoin (BTC) has been on an absolute tear in 2019 so far. The cryptocurrency has gained hundreds of percent on its bottom of $3,150, as have a majority of altcoins.
However, this market’s rally might not be done yet. According to a pioneer of Bitcoin, Adam Back, BTC surging by another 400% is “not far off”. And here’s why.
Why Bitcoin Could Hit $50,000
Back, the creator of the Proof of Work protocol that Bitcoin mining is based on, recently laid out a number of reasons why Bitcoin could hit $50,000 in the near future.
They are as follows:
- The May 2020 Bitcoin block reward reduction from 12.5 to 6.25 BTC per block: In May next year, the number of coins issued per block (every ten minutes) will be cut in half, resulting in a negative supply shock to the Bitcoin market. Historically, these so-called halvings or halvenings have preceded large parabolic rallies in the price of BTC. Should history repeat itself, the leading cryptocurrency’s next surge higher may be catalyzed by the 2020 halving.
- Geopolitical uncertainty: Over the past few years, the world has become increasingly tumultuous in terms of geopolitical events. Venezuela has collapsed as a regime has managed to inflate away the local currency, leading to local adoption of Bitcoin and other decentralized forms of money. Argentina recently saw its incumbent president, Mauricio Macri, lose the primary election for the presidential seat, resulting in a collapse of the Argentinian peso and the local stock market. Hong Kong has been embroiled in massive protests, as China has been duking out a trade war with the States. These three cases are only one of many that show that the world is unstable, and needs safe haven assets, be that gold or Bitcoin.
- $17 trillion worth of negative-yielding bonds: On Friday, Bloomberg reported that the negative-yielding bond situation has just developed. Their report, which cites the Bloomberg Barclays Global-Aggregate bond index, shows that $17 trillion worth of bonds is negative-yielding. To describe how crazy negative interest rates are, here’s Bitcoin commentator Rhythm to explain. As he remarked in a recent tweet, it’s essentially like lending someone your capital and expecting to receive less of it back in a few years’ time. In no world does this make sense.
- Modern Monetary Theory (MMT) becoming a popular trend: MMT, which is effectively an economic framework that says governments should heavily utilize fiscal policy to boost their economy, has become a popular trend in global politics. Many critics of the theory say it will result in mass inflation, leading to an increase in the valuation of hard monies, like gold and potentially Bitcoin.
Bring it on, 2020 halvening, lots of geopolitical uncertainty, $15tril of -ve interest bonds, MMT excuses being tested to bring an even more imprudent USD inflation regime.
— Adam Back (@adam3us) September 6, 2019
Model Predicts BTC Fair Market Cap of $1 Trillion
Adam Back isn’t the only one calling for Bitcoin to soon hit $50,000.
Twitter analyst PlanB’s seminal price model for Bitcoin, the stock-to-flow (SF) ratio model, has shown that after the halving, BTC’s fair market capitalization will swell to $1 trillion. This, as aforementioned, translates to $50,000 per coin.
The model states that certain commodities, namely gold, silver, and BTC, can be valued by taking their SF ratios (an asset’s above-ground supply over its yearly inflation) and plotting them on a certain line.
PlanB’s model predicts that come next May, Bitcoin’s SF ratio will begin to approach that of gold, which is currently at 55, meaning that its fair value should too.
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