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Prediction of BTC value using quantitative models – part 1

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Predicting the development of the value and price of BTC is a thorny but at the same time very popular topic. So there are several methods that help us with predictions. But first you need to know the basics.

Deficiency value

In recent months and throughout 2020, central banks around the world have been issuing unprecedented amounts of new money to try to face the inevitable economic crisis. We live in a world where each generation of newly issued money printed by central banks leads to inflation – that is, to a reduction in the purchasing power of the currency itself and, consequently, to an increase in the prices of goods.

This means that the more money is printed, the more its value decreases over time. The opposite of inflation is deflation – in other words, the more time passes, the more the currency appreciates and its purchasing power grows.

It is important to note that Bitcoin (BTC) has been designed to grow indefinitely. This is also because the smallest amount, known as Satoshi, is equal to 0.00000001 BTC. It is obvious that its creator imagined a deflationary system for his creation, which would help him achieve ever-increasing values. When the value of one Satoshi rises to the value of one US dollar, one BTC will be equal to 100,000,000 USD. This is the value that Satoshi Nakamoto had in mind for his own BTC.

Of course, not immediately, not even in the short term. The road will probably be long and paved with several bursts of bubbles. Only the bravest and most persistent, who will resist, will succeed in this enterprise.

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Is it possible for BTC to reach this value?

There are 7 billion people in the world, and at the end of its generation cycle, only 21 million Bitcoins could be in circulation. It is estimated that by 2020, approximately 20 million people in the world have assets in excess of $ 1 million, so it is not possible for everyone to have BTC. Many of them will not be able to own the entire BTC because it will be too expensive to purchase in a few years and because those who own it would never consider selling it. This is a phenomenon of scarcity.

While we are used to inflation, or the growing amount of money that central banks print, this does not exist in the world of cryptocurrencies. In some cases, there are special cryptocurrencies that are designed to decrease the number of tokens in circulation over time.

Deficiency along with the growing circulation of cryptocurrencies is the main reason why the price tends to rise. Owning the entire BTC will therefore be a luxury that only a few people can afford, a maximum of a few million – given that the first million is said to be firmly in Satoshi’s wallets.

This is the most specific option we know of when it comes to getting rich quick in a relatively short time. Nevertheless, the scenario for cryptocurrencies to become millionaires (there are about 100,000 of them in the world) has already materialized.

Precious metals and SF

The concept of scarcity is well known for commodities such as gold, silver, palladium or platinum. These expensive materials are more valuable the rarer their production. But is there a mathematical model that can estimate what the correct value of a commodity should be based on its rarity?

If we think about phenomena such as Ferrari, Rolex, ancient paintings by famous painters, etc., all these assets are valued significantly higher than the cost of their realization, due to their rarity, caused or created by those who created these assets themselves. as well as BTC. In fact, there is a mathematical model known as stock-to-flow, or SF, that estimates the price based on the quantity that is already present in the world (stock), with the quantity that is extracted each year (flow).

The smaller the amount extracted each year, the higher the value of the precious metal. And because doubling the stocks currently in circulation takes many years, it has value in itself because it is scarce.


BTC is becoming more and more popular, so it is definitely worth knowing the possibilities of predicting its price in the future.

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.
BlackRock (IBIT), the Grayscale Bitcoin Trust (GBTC), Fidelity (FBTC), Ark Invest/21Shares (ARKB), Bitwise (BITB), Franklin (EZBC), Invesco/Galaxy (BTCO), VanEck (HODL), Valkyrie (BRRR), WisdomTree (BTCW), Hashdex (DEFI)

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