Source: Wave Financial
How does $ 400,000 sound on bitcoin? Most likely extraordinary, especially if expected in the next five years.
But this is exactly the price that analysts at Los Angeles-based investment management firm Wave Financial believe bitcoin could reach, using the stock-flow ratio analysis analysis model, by 2025.
One of the most interesting parts of our report, released in late February 2021, is an illustration of how the stock-flow ratio was used to accurately predict the movement of the bitcoin price from $ 4,000 in March 2019 to about $ 50,000 in February. 2021 The stock-flow ratio is primarily a gold valuation model. The fact that it works better on bitcoin than most other models gives credence to the belief of many that bitcoin is digital gold.
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We say in the report, “Understanding the Impact of Bitcoin on Portfolio Performance,” that a $ 55,000 prediction seemed relatively strange in March 2019. But today $ 55,000 seems like a reasonable target for 2021. The $ 400,000 target price, again , looks great today. ”
Currently, in March 2021, one month after the publication of the report, some of our price targets are now exceeded, bitcoin exceeding the level of 60,000 dollars.
In mid-February, bitcoin hit a new all-time high of $ 50,000 and, for the first time, a market cap of more than $ 1 trillion. This is a market rally that was predictable, given the halving of the mining subsidy that took place in 2020 and the growing adoption of bitcoin as an institutional reserve asset.
In 2024, the bitcoin subsidy, the new coins launched in circulation, will be reduced from approximately 6.25 BTC every ten minutes to 3.125 BTC. In 2020, the mining subsidy decreased from 12.5 BTC. The subsidy is halved every four years, making bitcoin a deflationary asset, which we believe is one of the main bullish factors in its price.
Meanwhile, more and more, major corporate entities and investment firms have embraced bitcoin as a reserve asset. For example, MicroStrategy, a Virginia technology company, has taken the lead. The company, founded by Michael Saylor and Banju Bansal in 1989, HODL has about 90,859 bitcoins, worth over $ 2.186 billion. The last addition the company made to its ownership was a purchase in late February of an additional 328 bitcoin for about $ 15 million at an average price of $ 45,710 bitcoin.
Electric carmaker Tesla in early February revealed in a securities store that it had acquired bitcoin worth $ 1.5 billion. Indeed, in the last five years, a significant amount of bitcoin has moved into the ownership of large investment institutions and corporate entities.
Throughout February, rumors spread that the software company Oracle would announce the acquisition of 72,000 bitcoins. On March 11, the company dispelled rumors that the price of bitcoin had dropped by about $ 2,000.
Interest in bitcoin as a reserve asset by mass companies is not limited to the US In early March, Meitu, a Chinese technology company, announced the acquisition of 380 BTC and 15,000 ETH. It also turned out that Meitu founder Cai Wensheng owned 10,000 BTCs (worth about $ 504 million) in 2018.
At the same time, Aker ASA announced the establishment of Seetee, a company through which it intends to invest in bitcoin and bitcoin startups. Aker ASA is a Norwegian industrial investment company with interests in oil and gas, renewable energy, marine and environmental technologies.
Indeed, in the last five years, a significant amount of bitcoin has moved into the ownership of large investment institutions and corporate entities.
“The fundamental reason for such a focus on Bitcoin is actually centered around the financial environment of 2020,” reads part of our report. “Because of the pandemic, governments around the world are printing money to stabilize and stimulate the economy,” and this is pushing investors into digital assets as a safe haven.
The report also explains and illustrates the impact that the bitcoin price movement has on investment portfolios that have a significant component.
Source: Wave Financial
Bitcoin has technical aspects that differentiate it as a class of assets in portfolio management and is most likely to turn into a superior one. Historically, Bitcoin has worked well as a complement to various portfolios, as it has a low correlation compared to most other traditional asset classes. Using different hypothetical scenarios, cryptocurrency is an excellent tool for portfolio diversification and risk-adjusted portfolio management.
It is also very interesting to analyze technical comparisons between bitcoin and other assets using different scenarios and analyzing investment returns, focusing on values such as volatility, the Sharpe ratio and the Sortino ratio.
Wave Financial LLC (Wave) provides institutional products for digital asset funds. You can read the report “Understanding the impact of Bitcoin on portfolio performance” following this link.
This is a guest post by Constantin Kogan. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.