Bayern LB, one of the largest banking institutions in Germany, has revealed a report where they pitched Bitcoin as gold to investors. The Munich-established bank reported that Bitcoin valuations would jump to $90,000.00 per BTC by 2020. This is 4x higher than the current cost of a single bitcoin, and to extend their beliefs, Bayern stated to investors that Bitcoin would become more valuable than gold. This report is named “Is Bitcoin Outshining Gold?” and considered the stock-flow ratio for BTC. The stock-flow method analyzed the assets concerning scarcity. Subsequently, this enabled Bayern to calculate how many bitcoins were in circulation in comparison to the amount created. The calculations revealed that Bitcoin has a higher stock-flow than any other digital currency online.
The official report’s statement reads: “Historically speaking, it has invariably been the commodity with the highest stock-to-flow ratio at that juncture which has been used as money because this enabled the best value transfer over time.”
Bitcoin & Gold Differences
Bitcoin and gold are two separate entities. Gold has been sold for thousands of years in different contexts, and in the 21st century has achieved higher stock flows than any mineral. Though BTC has gained similar levels of popularity, it’s a relatively new market that will undergo substantial changes. However, Bitcoin is limited and can be produced at a rate that gold never could be mined. The considerable difference between Bitcoin and Gold is that BTC is managed as a virtual worldwide currency. The liquidity is far higher than the limited supply provided with gold. Subsequently, the stock-flow for Bitcoin has grown considerably faster than gold.
Even though Bitcoin is limited, there are scarcity issues that will follow in the coming years. The creator of Bitcoin, Satoshi Nakamoto, created the coin at 21 Million Units. Afterwards, Satoshi will have to create another program for additional coins to be mined. Until then, the creator has been receiving mined bitcoin blocks every four years. These blocks enable Satoshi to develop an additional one million Bitcoins. It’s unlikely that MrNakamoto will release another mining program for BTC, as this would force the valuation to drop drastically. Considering he holds the most extensive collection of Bitcoins, the higher the cost means more significant profits.
The German Banking Institution, Bayern LB, firmly anticipated the upcoming scarcity issues with Bitcoin. They’ve also expected that the scarce bitcoins would enable better stock flows for the coin. Bitcoin currently sits at a stock-flow of 25.8, while gold’s stock-flow has remained at 58 for a prolonged period. When the currency becomes halved by scarcity issues, this will push the Bitcoin Stock Flow to 53. This would make it nearly as valuable as the world’s most precious mineral. On the flip side to that coin, Bayern LB is also preparing for a worst case scenario. There’s always a chance that the valuation of Bitcoin could drop, even with the halving. There have been multiple instances where BTC was on track to be worth $10,000.00 per coin, but an attack on Binance and regulation issues prompted the currency to have a dropdown. There was more than a 20% drop in valuation, making each BTC worth $8,000.00.
The report stated: “If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the future halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000. One knows only too well that even the best statistical model can fail miserably when attempting to predict the future.”