like a commodity
In well-known markets there is an asset class (among the oldest) that actually shows many similarities to the sector alternatives encryption. I am definitely not talking about forex. I’m talking about the market for goods Not to be confused with the Italian term ‘raw materials(Although when we refer to commodities in the stock exchange we are referring to commodities) goods Means “fungal goodsor “goods” Materials” Easily stock And storable. one among hard goods The most famous is Capital, Not intended to be a medium of exchange, the second is petroleum.
encoder on raised For example, they are identified by definition as exchangeable or non-exchangeable goods. We actually have me replaceable symbol Which Token is not replaceable.
So, let’s try to ask ourselves: How does a commodity work in the financial markets? The goods They change their price for three main reasons: 1) Speculation 2) Stopping production 3) The policy of the producing countries.
From 2000-2002 the goods underwent a process Finance In various exchanges (recognition as an asset). This has greatly increased the demand for commodities even though the world demands the same amount of assets in relative terms. What is the reason for this? of speculation. It follows that a large part of the demand will not really be due to the need for raw materials but simply to the desire for speculation. Can we extend this consideration to the crypto market as well? Well, I would say yes.
If this important component of demand (called speculation) shifts to other, more financially attractive markets, what will happen to the crypto market?
The world of cryptocurrency can be brought into a cycle, just as the economic cycle exists in traditional markets, through the naked and raw overlay of half cycle?
goods seasonal The price depends on a series of factors related to its seasonality. What is seasonality in raw materials? It is a cycle that characterizes its price, and it depends on the recurring situations associated with the mechanism of supply and demand. beyond the fact that goods divided into two categories (hard and soft), what unites them is their concrete use in physical processes. For example, industrial raw materials are used for industrial production, and then it is natural to think that their price will vary according to the demand of the sector they belong to and the production of the supplier. Production and demand depend on factors outside the production cycle, for example loss or (soft) meteorological events. Assuming the same is analogous to BTC, it is possible to create mathematical models that describe the price of a cryptocurrency based on its scarcity which, roughly speaking, is dictated byhalf.
Halving is the event in which the coin miner’s block rewards are halved. Therefore, the miner guarantees the life of the Blockchain and through proof of work, this guarantee is constantly paid to the validators. The last halving occurred in May 2020. The mining reward has been reduced from 12.5 BTC per block to 6.25 BTC. If we perform the calculations, every 210,000 blocks, the bonus amount should be deducted. According to the original BTC code, there can only be 64 halvings. When the latest Bitcoin is released, 21 million coins will be circulating in the market. Why should miners find it convenient to mine Bitcoin? Because the Halving mechanism makes the coin rare and therefore constantly growing over time. So what characteristics can we associate BTC in common with certain commodities? rarity
stock to flow
Using this model, we are trying to hypothesize what will be the capitalization that BTC can reach based on this loss. Inventory to flow refers to the number years they want us flow The annual given (the quantity extracted each year) to reach it stock current (circulating quantity). Let’s start by asking whether or not there is a relationship in the commodity market between the amount of quantity extracted each year (the flow) compared to the total actually traded (the stock): the answer is yes and provable.
This consideration also applies to the Bitcoin economy but in a more than proportional way, precisely because of Halving.
So it is possible to overlap the value that BTC should have in this period with the current market price to get an indication of the medium to long-term trend of BTC.
It is easy to see that this model has accurately described the overall trends that have characterized BTC in the past halving and that it is currently evaluating BTC as underrated compared to its scarcity value.
To be precise, he expects to reach the $100,000 threshold by 2024.
But this is just one of the many models that try to justify BTC’s performance by attributing values that are considered objective and concrete.
In the next version, we will analyze other models based on production cost such as the famous forecast chart created withHashPower.