You wouldn’t expect a traditional financial institution to come up with a very optimistic forecast about the future of a cryptocurrency or an honest appraisal of its design. But Bayern LB, a lender based in the rich German province of Bavaria, has surprised the crypto community. In a recently published research paper, the bank asks a rather rhetorical question: “Is Bitcoin outshining gold?” and predicts a tenfold increase in BTC’s price by the spring, when the next bitcoin block reward halving takes place.
The ‘Hardness’ of a Crypto Asset
“The harder Bitcoin is, the greater the value,” Bayern LB’s experts conclude. Just like gold, but unlike other precious metals with alternative utility value such as palladium, demand for bitcoin is due to its monetary qualities as a store of value and means of exchange, and not because it’s subject to other uses, industrial for example.
“If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges,” the Bayerische Landesbank’s analysts predict. “This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000” the German bankers remark.