Bull market expected? S2F and other data models prove that Bitcoin value may be seriously underestimated

On Wednesday, the Federal Reserve raised its inflation expectations and moved the rate hike year from 2024 to 2023, and monetary policy continued to remain loose. Although Powell reiterated that inflation is "transitional", the news boosted Bitcoin prices briefly, but the upward momentum did not continue. It closed lower on Wednesday and fell further on Thursday. At the same time, according to the price deviation ratio of the S2F model, compared with the historical trend of the past 10 years, the value of Bitcoin today may be the most seriously underestimated.

Furthermore, Bitcoin is deviating from its 11-year upward trend line. The deviation has reached a negative value of 36%. This again gives an additional signal that Bitcoin is undervalued and it still has huge room to rise.

Crypto investor @CryptoMichNL pointed out in his recent video that Bitcoin’s S2F model shows that Bitcoin shows great buying potential.

The price of Bitcoin was still fluctuating around $40,000 on Thursday, while according to the model it should theoretically be slightly above $100,000.

The first such clear negative deviation occurred in the early days of the network development. At that time, the price of Bitcoin was less than $0.1 in October 2010. The second similar situation also occurred in the middle of the bull market in 2017, when the price of Bitcoin was around $2,000. After that, the price of Bitcoin resumed its exponential growth, which made it reach its historical high of $20,000 in December 2017.

Therefore, the stock-to-flow offset graph not only gives a general indication of BTC’s relative value. It also provides an additional argument that the cryptocurrency market is in a long-term bull run. This is also consistent with some on-chain analysis indicators that are currently providing similar readings.

The Bitcoin Stock/Flow Model, recommended by PlanB, a famous Bitcoin analyst, can be traced back to Saifedean Ammous' classic work "The Bitcoin Standard". It expresses the relationship between the stock, circulating supply, flow, or new products of any asset whose quantity grows over time. For Bitcoin, it is the relationship between the circulating supply of currency and newly mined currency.

The strength of this model lies in its historical validity and accounting for halving cycles. So far, Bitcoin’s price has followed the stock/flow model surprisingly accurately, so we can use this model to predict the future valuation of the largest cryptocurrency.

Another cryptocurrency investor, @dan_pantera, CEO of Pantera Capital, posted a chart of Bitcoin price deviations from its 11-year trend on Twitter yesterday. It shows that the current price is 36% below the trendline. Furthermore, the chart shows that throughout history, Bitcoin has only been below the 0% level 20.3% of the time.

Looking back, these nodes were the best buying opportunities and did generate substantial gains. The undervaluation is also high, as the negative 36% level has appeared several times in this cycle. However, Bitcoin never reached the current value in the 2015-2017 cycle.

This again provides another argument that Bitcoin's behavior in the current cycle is closer to that of 2012-2013 than the previous bull run. In other words, to use the most common phrase in the currency circle, "the era of cryptocurrency has just begun."