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Data demonstrate that deviations from the stock-to-flow average have always resulted in a reversal to new all-time highs.
Bitcoin’s (BTC) three-week stay in the $30,000 region has proven to be a critical test for one of its most well-known pricing models.
As noted by Philip Swift, co-founder of trading suite Decentrader on June 11, Bitcoin is issuing a major challenge to the stock-to-flow price forecasting tool.
Is it bounceback time for BTC price?
BTC price action has hovered in a lower corridor between $30,000 and $40,000 since mid-May. This has worried day traders, while vintage bulls have called for calm and a long-term mindset.
As previously noted, the stock-to-flow model continues to account for such behaviour, even though its predictions place the BTC/USD value closer to $70,000.
Nonetheless, its inventor, PlanB, has expressed anxiety about the future. If present levels persist for an extended length of time, his model may be rendered invalid for the first time in its history.
Swift said that similar cases had occurred before, citing spot price divergence from the stock-to-flow average. Bitcoin bounced off a set price point relative to the stock-to-flow average each time, finally reaching new all-time highs.
“It’s a long time since price has been this far below S2F line,” he told Twitter followers.
“Divergence oscillator at bottom of the chart is highlighted by the orange dotted line and arrows to show comparable historical periods. Bitcoin price rebounded hard from such divergence previously.”
PlanB eyes moving averages
Because of the realism of May’s price drop, PlanB previously claimed that this year’s Bitcoin bull cycle is more reminiscent of 2013 than 2017.
In both 2013 and 2017, a two-tier run reached an all-time high. In each case, the first high was followed by a large drop, which subsequently reversed to launch a fresh run to the top.
PlanB continues to anticipate that $100,000 per Bitcoin will be reached this year, whereas stock-to-flow forecasts either a $100,000 or $288,000 average price between now and 2024.
He mentioned two important day moving averages (DMAs) earlier this week as a potential launchpad for a comeback in the coming months.
“If June close will be $54K (or higher) and July, August also $54K (or higher), then 50DMA will bounce off 200DMA and stay above 200DMA,” he tweeted.
“So a nice short squeeze and V-shaped bounce back to $54K (+69%) would result in then bounce back scenario.”