Bitcoin is still showing a strong downtrend as the cryptocurrency market is still under pressure. Bitcoin price fell below $30,000 over the weekend after suffering a 20% drop in the past 14 days. However, the creator of the Bitcoin Stock-to-Flow (S2F) price prediction model, claims that the bear market is almost over.
PlanB has a reputation for making accurate bitcoin price predictions. Although imperfect, its predictions have proven to be generally reliable, in particular thanks to the Stock-to-Flow model.
The analyst predicted a market capitalization of $1 trillion for Bitcoin in 2019, when most analysts and investors did not believe it.
PlanB was optimistic about the future of digital currency, posting a chart with a realized moving average (RPMA) <1 and relative strength index <50 which, in his words, indicates historically good times to buy.
The analyst also believes that it may take some time for the RPMA and RSI to recover. He recently announced that the price of bitcoin has reached a new low for the next bull market.
The Bitcoin price trend will reverse, according to forecasts from PlanB, which claims that the bear market is almost over and the price should start rising soon. The well-known analyst believes that the current RPMA and RSI levels indicate a low price for bitcoin.
However, according to him, it could take 6-9 months (like in 2014 and 2018/19) or 1-2 months (like in 2011 and 2020) before we see a jump. Bitcoin is currently trading sideways around the $30,000 level.
“Real price/moving average (RPMA, purple) best reveals bitcoin’s cycle. The Relative Strength Index (RSI, yellow) is similar but can be misleading at critical times (eg 2:21). The good news is that the bear market is almost over. I hope that the RPMA and the RSI will start to increase again.
Despite PlanB’s market view, its supporters also believe that the bear market is not over yet, given the Bitcoin halving.
The trend shows October as the low where bitcoin price can confirm a recovery. However, if the bear market ends in 1-2 months, youA new all-time record can be seen in a year.
Correlation with stocks
PlanB also stated that there is a correlation between the US stock market and bitcoin, specifically the S&P500 and bitcoin. The stock market and bitcoin have been falling since November 2021.
Moreover, the S&P 500 is bearish since it is down about 20%. Analysts believe that accumulating bitcoins at the current price can bring big profits to long-term investors.
Bitcoin’s Stock-to-Flow model uses live chart data to track the price of the asset over multiple time frames. The chart plots the bitcoin price, which in turn creates a comparative view of the bitcoin price prediction against its market price.
The chart shows the current Bitcoin price and how much it differs from its price prediction at a specific time. Investors around the world also use the S2F model as an indicator. They use the pattern to trade Bitcoin assets so that negative deviations in the forecast are interpreted as a downside buy signal. Positive deviations, on the other hand, indicate a sell signal.
The S2F index is calculated by dividing the supply (current number of bitcoins in circulation) by the flow (number of bitcoins created). The Stock-to-Flow model predicts changes in value relatively directly.
Current inventory is compared to an asset’s annual production rate. Currently, 19 million bitcoins are in circulation. As such, a higher ratio indicates greater rarity, which translates into a high prize value. The SF2 model asserts that the scarcity of bitcoin leads to an increase in its value.