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Bank of New York Mellon, one of the country’s oldest financial institutions, announced the opening of a custody facility for Bitcoin and other cryptocurrencies in February. The organisation chose to be ahead of the curve in terms of progress, claiming that BTC has become a commonly known commodity.
BNY Mellon has now released a Bitcoin valuation that compares the attributes of gold to the blockchain in an effort to provide methods for determining its worth. BNY Mellon analysts understand BTC’s peculiar properties and how difficult it can be to measure its worth by using national currency metrics. According to the analysts:
“it should be considered as part of the valuation mosaic. At the beginning of May 2020, a single Bitcoin was worth roughly $8,8001 and the total market value of all Bitcoin was worth $160 billion2, accounting for 0.4% of total global currencies. At current rates, if Bitcoin replaced 5% of the world’s currency it would yield over $100,000/Bitcoin.”
When comparing Bitcoin and gold valuations, BNY Mellon analysts used Plan B’s Stock-to-Flow (S2F and S2FX) model. Though admitting that this model has shortcomings, they also described it as “elegant,” with a “far more developed gold market structure.” The analysts went on to say:
“The implication from this model is that as Bitcoin gains more mainstream momentum and is viewed more like gold, the scarcity value (as measured by S2F) and subsequent halving will ultimately drive prices to the gold dot cluster and implied total market value”
However, the study argues that valuation is “more art than science,” and therefore stresses that all models must be “constantly” changing in order to meet Bitcoin’s “fair” worth.
Bitcoin’s price in the short and long term
At the time of publishing, Bitcoin is selling at $54,420, reclaiming this critical support zone. BTC is heading sideways on the 24-hour scale, but it is also on a positive trend on the 30-day chart, with 17.8 percent gains. Huge buyers have affected Bitcoin’s market activity in recent weeks.
According to analyst Lex Moskovski, the number of Bitcoin whales carrying about 1,000 BTC has fallen to the trend line since peaking on February 21 when the huge sell-off began. According to Moskovski:
“However, the price has risen since the start of the dump. This is bullish and also benefits decentralization. Text-book consolidation.”
Yan Allemann and Jan Happel, co-founders of research company Glassnode, stated that the cryptocurrency’s near-term growth would be associated with the pace of retail investor expenditure. BTC’s price could increase if any of the beneficiaries of Biden’s stimulus plan chose to invest in the cryptocurrency.
“Many households now have an extra buffer of income to spend, due to new stimulus checks and decreased spending during lockdowns.”
— Jan & Yann (@Negentropic_) March 28, 2021
In the long run, Bitcoin’s supply shock would be important, as crypto exchanges continue to report high amounts of BTC outflow. According to analyst William Clemente, this supply is being illiquid. Clemente predicted an increase in the price of Bitcoin in the third and fourth quarters of this year, saying:
“the increase of negative-yielding bonds will leave fixed-income investors desperately searching for yield. With everything being manipulated in the fiat world, all roads lead to the free and open Bitcoin market.”