Bitcoin might be up at spot rates, breaching $60,000 as momentum builds up. However, from a technical analysis perspective, bulls need more effort.
Most importantly, this will involve breaking above the local resistance level at around $63,000. A decisive, high volume close above this liquidation zone will confirm buyers of August 8 while confirming the possible resumption of Q1 2024.
Bitcoin May Reach $500,000 If Inflation And Dynamic Supply Is Factored In
A close higher, lifting valuation above $66,000, $72,000, and even all-time highs would likely ignite demand, lifting prices to fresh highs by the end of the year. Most traders expect Bitcoin to edge higher, especially now that the United Federal Reserve plans to slash interest rates, ushering in an accommodative monetary policy.
With Bitcoin billed as a hedge against inflation, one analyst taking to X notes that the coin’s valuation should be much higher if all influencing factors are considered. In a post, the analyst said that by incorporating inflation and the changing supply of Bitcoin based on the power law model, the world’s most valuable coin is predicted to be worth much more by 2029.
In the analyst’s findings, traditional power law models, though popular in predicting the price of Bitcoin, tend to overlook the impact of inflation. At the same time, price forecasts using this model fail to consider the increasing supply of BTC.
However, when these shortcomings are addressed and the power law model re-factored to consider the above metric, then by 2029, BTC could reach $500,000, 66% higher than previous estimates. In this improved model, the use of the market cap of Bitcoin as a proxy for value proves to be critical.
Metcalfe’s Law And Impact Of Institutional Demand
This approach aligns closely with Metcalfe’s Law and the network effect. The law states that the value of any network, in this case, BTC, is directly proportional to the square of the number of adopting users.
Though the market market isn’t a perfect measure, it, nonetheless, offers a more accurate representation of the intrinsic value of Bitcoin. In the analyst’s view, it is more effective in measuring the intrinsic value of BTC than relying on the spot price.
Beyond inflation, traders expect inflows via spot ETFs to lift valuation like in Q1 2024. For now, Soso Value shows that all spot Bitcoin ETFs manage over $55.96 billion worth of BTC. BlackRock’s IBIT has seen inflows of $21.5 billion since launching in January 2024.
Feature image from Canva, chart from TradingView
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