Bitcoin is on the cusp of a major event that only happens once every four years and which has historically signalled major shifts in the market towards new all-time highs.
Indeed, as central banks and global authorities steam ahead down the path of least resistance through money printing and quantitative easing, bitcoin is set to undergo a process that ensures scarcity in a world characterised by cheap credit.
The significance of this event cannot be understated and comes during a pivotal moment in history that serves to bolster projections of an eventual six-digit bitcoin. As it happens, it is becoming more apparent that this health crisis is quickly turning into an economic crisis akin to 1929.
Just last week, Bank of Japan opened the door to unlimited quantitative easing through government and corporate bond repurchases worth up to 80 trillion yen as central bankers dabble with their financial chemistry set to attempt to fix things.
As central bankers play ‘follow the leader’, recent events have shed light on a euro-dollar financial system that can conjure up money into existence out of thin air without any immediate consequences. In reality though, there is a cost to infinite Fiat money distribution, one of which is the slow but steady financial education to the masses. To add fuel to the fire, the US House is now considering a plan to pay Americans $2,000 per month until the economy recovers fully.
The news came just as US citizens received their stimulus check of $1,200, which will ease problems caused by joblessness and a virtual halt in the economy. While it makes sense to argue that this has to be done to prevent social unrest, the consequences of ‘free money’ make expectations of hyperinflation more realistic than previously thought.
Given that monetary policy is a tool used by central banks, then it’s worth looking at data which comes as a consequence of bitcoin’s monetary policy – which is hard-coded into the digital asset.
The financial after-effects seem to be serving as a catalyst for radical financial change
Having studied bitcoin over the years, enthusiasts and data scientists have theorised a prediction model built on bitcoin’s quantitative hardening monetary policy – and it’s called the ‘stock-to-flow’ model by PlanB.
In hindsight, the model is a projection tool that forecasts bitcoin breaking new all-time highs within the coming years due to its hard-coded distribution mechanism that ensures limits on supply.
Going by the name of PlanB on Twitter, the creator of this model came under fire recently after bitcoin’s price plunge to $3,800 on Black Thursday. On April 14, he tweeted: “#Bitcoin Stock-to-Flow (S2F) & Relative Strength Index (RSI)... great set-up: halving in 28 days and oversold.”
More recently, as the bitcoin price surged past $7,500 to touch $7,800, he tweeted a recent bullish report that shows Bloomberg getting on the bitcoin bandwagon. In a somewhat vindicated backdrop, PlanB tweeted: “It is happening.. “Bitcoin gold-like transition”.
Put simply, the model plots bitcoin’s price over time and factors in the effect of each quantitative hardening event in order to project bitcoin’s future price. At the time of writing, the halving is set to take place in a few days.
While the model doesn’t take into consideration the effects of a global pandemic, the financial after effects seem to be serving as a catalyst for radical financial change as problems within the Fiat financial system pave a clear path currency debasement.
To put things into perspective, the US Federal Reserve has printed over $5 trillion to cushion the blow of zero economic activity, and with further stimulus and money distribution in the pipeline, the trajectory for the euro-dollar fiat currency system becomes even more clear. When it’s all said and done, the legacy financial system will never be the same.
As with previous recessions and economic depressions such as the one in 2008, during times of rampant money printing, people eventually turn towards commodities and hard assets in order to retain their money’s value against cheap credit, buybacks, and easy money.
While nothing is set in stone and this shouldn’t be considered as financial advice, the turn of events currently under way have shifted the balance of probabilities further towards a money renaissance, the after-effects of which will continue to ripple on in decades to come.
Christopher Attard’s background is in journalism and finance, and studied psychology at the University of Malta. He has worked in the bitcoin and cryptocurrency space for years and provides services for SMEs in the industry. contact@chrisoncrypto.com