Bitcoin - value of S2F model and TA on 1MMany bitcoin investors believe in the S2F (Stock to Flow) model and expect bitcoin to rise to 100,000+ USD any time soon. The model advocates that an asset has a production/supply limit, for example, like gold and silver and therefore, in the long run, such an asset will only grow in value. This is all true!
Hard asset
Bitcoin has a limited supply of 21 million. This makes it a hard currency, so by 2040 one can expect it to be worth 1 million USD per unit. By that time, Bitcoin will mainly be used as a banking transactions' instrument, while for investment purposes a new fork will be created most likely.
What's the buzz?
If you are a long term investor and time is on your hands, then simply wait another 15-20 years and you'll collect your jackpot. However, if you are a trader on 1D, then you should take into account that bitcoin is a high-risk asset due to its volatility, it runs in cycles that are determined by macroeconomic factors and its drop to 10,000-7,000 USD is more than real. If in doubt, then take a look at US Binance on October 21, where the price of bitcoin fell by 87% from 65,000 USD to 8,200 USD within a minute.
It's important to remember that the cost of bitcoin is primarily the cost of electricity used for mining + the cost of its farm's infrastracture. For large industrial farms, such as Poolin, Bitmain, Crypto Scientific etc. that make up the main share market - the cost per bitcoin is around 3000-5000 USD. Everything else is mere speculation and the belief in hard asset. So ask yourself - under what circumstances can the price of bitcoin fall in the S2F model?
A simple example of a cycle
Take any famous artist. During his life, he can create only a certain number of paintings. The price of a painting grows progressively as the artist becomes more famous and demand for his work increases. This is a S2F model. A painting's cost bottom remains unchanged - it includes the canvas, paints for drawing and the time it takes to create the masterpiece. All of a sudden a global war arrives. There is misery and hunger! This is a cycle. During this period, an artist's painting loses its value and is sold for a loaf of bread.
Recession
In this insance, bitcoin's war is a global recession that has already begun. This is confirmed by US bonds' price inversion. As in the last 9 recession cycles over the last 60 years such course was always followed by a market crash. Based on previous cycles, the recovery of the US economy took an average of 9-16 months. Hence, we are looking into 2023 at least before any further growth!
TA on 1M
The blue curve is now flat at the top. The upward blue trendline was broken back in November 2018. In June 2021, the price exited the green wedge and bounced off it in October 2021. Two days ago the price broke through the second pink wedge, so far only as a shadow, but it is only the beginning of the month. RSI has a clear price divergence. MACD is at the peak of a rising wedge. RVI has broken through 50. Vertical volumes keep falling while price rises.
