Written by: Luke, Mars Finance
Introduction: Can Bitcoin's Future Be Predicted?
The price trend of Bitcoin is like an unsolved puzzle, attracting the attention of countless investors and analysts worldwide. While many hope to predict future prices, numerous celebrities boldly proclaim their predicted prices, but behind these predictions lie complex data analyses, team collaborations, and multidimensional reasoning.
However, there are always those who attempt to find the most direct and intuitive predictions with the simplest models and indices. Just as we always yearn to find a single formula or function to solve all variables in the face of a complex mathematical problem.
This simplified way of thinking has attracted a number of followers. It does not rely on complex multidimensional models but attempts to provide investors with quick and direct market signals through simple indicators. Although this method may not provide comprehensive analysis like multidimensional research, it can offer investors some decision-making basis in high-volatility markets.
Yesterday, renowned crypto analyst PlanB released a remarkable prediction: Bitcoin's prices in October and November reached the target, setting a historical high, with the next target pointing to the $150,000 mark. In this article, we will start from the S2F model and review the three most well-known Bitcoin prediction models/indices in the crypto space, each offering its perspectives and predicting different possibilities for Bitcoin's price.
Stock-to-Flow (S2F): The Magic of Scarcity and Time
In the field of Bitcoin price prediction, the Stock-to-Flow (S2F) model has almost become a 'classic among classics', as neither investors nor analysts are willing to overlook the insights it brings. The core assumption of this model is that scarcity is an important determinant of asset value. Bitcoin's scarcity arises from its total supply being strictly limited to 21 million coins, and the 'block reward' mechanism that halves approximately every four years reduces the speed of new Bitcoin creation, further driving up its market value. The founder of the S2F model, crypto analyst PlanB, borrowed ideas from traditional precious metals markets (such as gold) and transplanted the 'stock/flow ratio' of gold onto Bitcoin, suggesting that by comparing the existing supply of Bitcoin (stock) with the new supply (flow), one can measure its scarcity and thus predict Bitcoin's price.
The S2F model was proposed on March 23, 2019. Initially, the predictions of this model were very accurate, especially in predicting Bitcoin's price trends after the 2020 halving. From 2019 to May 2021, the S2F model's predictions were nearly flawless. However, starting in 2021, the model's accuracy significantly declined, with predictions being vastly higher than actual prices. This turning point raised doubts about the model's reliability, but it is worth noting that PlanB predicted that Bitcoin's price would reach $55,000 within 1 to 2 years after the May 2020 halving, and that Bitcoin's market capitalization would exceed $1 trillion, a prediction that later proved almost entirely correct and catapulted PlanB to fame on Twitter.
At that time, PlanB further analyzed the sources of funds needed for Bitcoin's market capitalization to exceed $1 trillion, providing several possible channels: silver, gold, countries with negative interest rates (such as policies in Europe, Japan, and the United States), 'predatory governments' (like Venezuela, Iran, Turkey), and the hedging quantitative easing (QE) strategies of billionaires and millionaires. Coupled with institutional investors' interest in Bitcoin, which has performed the best over the past decade, PlanB predicts that these capital flows will drive rapid growth in Bitcoin's market capitalization.
Although the S2F model's predictions since 2021 have not fully aligned with actual outcomes, PlanB remains steadfast in his theory. He predicts that with the upcoming halving event in 2024, Bitcoin will reach a price of $500,000 by 2028, with a market capitalization exceeding $10 trillion. This prediction, while still challenging, provides many with a long-term vision based on scarcity.
To further expand the framework of the S2F model, PlanB launched the Stock-to-Flow Cross-Asset (S2FX) model at the end of 2019. This model integrates comparisons between Bitcoin and other scarce assets like gold, attempting to explain the more complex causal relationships behind Bitcoin price fluctuations. The core assumption of the S2FX model is that Bitcoin is not only closely related to its own supply but also interacts with the market behaviors of other scarce assets like gold. Therefore, the S2FX model provides a 'cross-asset' perspective on Bitcoin price predictions, attempting to explain Bitcoin's unique position in the global asset market.
The introduction of the S2FX model has provided a more macro perspective on Bitcoin price predictions. Compared to S2F, S2FX not only considers Bitcoin's supply and demand but also incorporates global economic factors, market sentiment, and the market trends of other scarce assets. While the S2FX model was relatively accurate in its predictions after the 2020 halving, where Bitcoin's price indeed saw a significant increase, it also faces challenges similar to those of S2F—such as Bitcoin's price failing to break the $1 million mark in 2021 as expected. These deviations have sparked discussions about the model's validity, especially when the market experiences severe fluctuations, whether scarcity can continue to dominate Bitcoin's price movements remains an open question.
Nevertheless, the S2F and S2FX models still occupy an important position in Bitcoin price predictions. Especially the S2FX model, which provides a more diverse framework for Bitcoin's long-term trends, viewing Bitcoin as part of the global scarce asset market and helping investors understand Bitcoin's future potential from a broader perspective through comparisons with assets like gold. By 2025, according to the S2FX model's predictions, Bitcoin's price may exceed $1 million, a target based on the interaction between Bitcoin's supply scarcity and the global economic environment. Although this prediction remains full of uncertainties, the S2FX model undoubtedly provides a compelling prospect for Bitcoin investors from a long-term perspective.
Long-Term Power Law Model: The Power-Law Growth of Bitcoin's Future
The power law model proposed by former physics professor Giovanni Santostasi is providing a novel and thought-provoking perspective on Bitcoin's future price trends. According to this model, Bitcoin's price may achieve an astonishing 6300% growth over the next twenty years, with the price of each Bitcoin expected to reach $10 million by 2045. This prediction is based on a simple yet powerful mathematical relationship—the power law.
The Mystery of Power Laws
The so-called power law refers to the relationship between two variables that exhibits a fixed power ratio under certain conditions. Unlike the linear or exponential growth we commonly understand, the power law relationship emphasizes how one factor changes in the form of a power as time progresses. We can observe many phenomena in nature that follow power laws: from the magnitude of earthquakes to price fluctuations in the stock market, power laws are almost ubiquitous. The existence of such regularity, while seemingly chaotic on the surface, actually presents a deeper order and pattern.
Santostasi's Bitcoin power law model is precisely based on this mathematical principle. He points out that Bitcoin's price fluctuations are not purely random or exponential increases but develop on a more stable and predictable trajectory. Unlike the traditional 'stock-flow model' (S2F), the power law model does not rely on the assumption of exponential growth but is based on logarithmic growth. This means that the long-term trend of Bitcoin's price will not only gradually tend to rise but also that volatility will be more orderly, allowing for a more accurate prediction of future price levels.
The Future Direction of Bitcoin Over the Next 15 Years
Santostasi first proposed this model in 2018 and shared it in the online Bitcoin community r/Bitcoin, attracting significant attention. By early 2024, financial blogger Andrei Jeikh mentioned this model on his YouTube channel, bringing the power law model back into focus. According to this prediction, Bitcoin may reach a price peak of $210,000 in January 2026, after which it may potentially retreat to $60,000.
However, Santostasi emphasizes that the uniqueness of this model lies not in short-term price fluctuations, but in its accurate depiction of Bitcoin's long-term trend. Compared to the linear charts and momentary fluctuations popular in the current market, the logarithmic graph of the power law model reveals a beautiful regularity: the price trend is not chaotic, but rather exhibits some inherent structure, as if it were a time curve honed over a long period.
Further analysis predicts that if Bitcoin's price can follow the power law trajectory, it may even break the $1 million mark within the next two to three decades, surpassing gold in market capitalization. By 2045, the value of a single Bitcoin may reach $10 million.
This prediction makes one ponder whether Bitcoin is entering a brand new historical phase, becoming an asset that cannot be ignored in the global economy. However, the power law model is not without controversy. Critics argue that any prediction based on mathematical models cannot avoid significant errors, especially when faced with unexpected events that could influence prices, such as policy changes, technological breakthroughs, or global economic crises. Moreover, although the model emphasizes a long-term upward trend in prices, short-term market uncertainties may still lead to severe fluctuations.
ahr999 HODL Indicator: Revealing the Deep Laws of Market Sentiment
When analyzing Bitcoin's market trends, in addition to classic predictive models, we also need to pay attention to more practically valuable tools and indicators. Among them, the 'ahr999 index' is an indispensable presence.
The name 9God may seem unfamiliar to most, but within the crypto sphere, it is an undeniable presence. The book written by 9God (HODLing Bitcoin) not only elaborates on the investment philosophy of Bitcoin but also proposes the idea of 'HODLing Bitcoin in undervalued ranges', becoming a classic in the hearts of cryptocurrency investors. 9God believes that Bitcoin, as a scarce resource, has immense long-term appreciation potential, and the true investment opportunities often arise when the market is at its lowest. This view has not only spread widely among his fans but has also guided many novice investors in the right direction.
In 2019, 9God first proposed the ahr999 index, an innovative indicator that quantifies the Bitcoin market through multiple dimensions such as Bitcoin price, 200-day dollar-cost average, and index growth valuation. Through this method, 9God provides investors with a simple and intuitive way to identify the best timing for 'HODLing' and 'dollar-cost averaging', avoiding blind speculation during market overheating and making more targeted rational decisions.
9God did not invent this indicator out of thin air. In fact, his in-depth research on the Bitcoin market and meticulous observation of price fluctuation patterns provided a solid foundation for this idea. Particularly, his profound understanding of Bitcoin's price trends led him to propose this quantifiable analysis method based on dollar-cost averaging and index valuation. The advantage of this method lies in comparing two core factors—the current price of Bitcoin with the 200-day dollar-cost average and the index growth valuation—to help investors grasp the market price's relative undervaluation.
The charm of the ahr999 index lies in its simplicity and effectiveness. By combining Bitcoin's current price with the 200-day dollar-cost average and index growth valuation, this indicator provides investors with an intuitive signal regarding whether the market valuation is reasonable. Specifically, when the ahr999 index is below 0.45, the market is typically undervalued, and investors should consider allocating funds to Bitcoin to gain returns when prices rebound; when the index is between 0.45 and 1.2, it is the 'dollar-cost averaging' range, where investors can choose to regularly purchase Bitcoin for long-term asset appreciation; once the index exceeds 1.2, the market may have entered an overvalued stage, and investors should be cautious to avoid blind speculation at high levels.
Through this quantitative analysis, investors no longer rely on intuitive market sentiment but make decisions based on data-driven signals. Rather than being a tool, it is a philosophy of rational investment that allows investors to be less influenced by the short-term volatility of the market and take action at the right moment to achieve robust returns in the future.
Limitations: Idealism Meets Reality
In theory, the long-term power law model, the S2F model, and the ahr999 indicator each possess their unique charm. They are like blueprints of idealism, attempting to reveal the inherent laws behind Bitcoin's price with simple mathematical formulas and logical frameworks. However, when these models encounter the complex and ever-changing realities of the market, the brilliance of idealism is often overshadowed by the shadows of reality.
Firstly, most of these models are based on historical data and assumptions of long-term trends, yet the market does not always develop linearly. Sudden black swan events, such as abrupt regulatory changes, global financial crises, or technological innovations, often lead to significant market fluctuations, and these unforeseen factors are hard to be predicted or addressed by models. As investors know, fluctuations in market sentiment and collective psychology often dominate price movements in the short term, and rational expectations may collapse in the face of panic or greed.
Secondly, these models rely too heavily on a single factor. The S2F model focuses on Bitcoin's scarcity, while the long-term power law model seeks universal mathematical laws in price trends, but they overlook the complex economic environment, regulatory changes, and technological advancements behind Bitcoin. Such overly simplified assumptions make it difficult for the models to accurately capture the dynamic changes in market structure. For example, when the Bitcoin market shifts from being driven by scattered small investors to being dominated by large institutions and governments, the predictions of these models may quickly become invalid.
Furthermore, although these models may provide some guidance to investors regarding long-term trends, their predictive ability for short-term price fluctuations is relatively weak. The volatility of the crypto market is immense, and investors often face rapidly changing market sentiments, panic selling or the fervor of optimism can instantly shift market direction. In such an environment, overly relying on any single model could lead to falling into the trap of 'idealism'.
Conclusion
Despite the uncertainties surrounding these predictive models, especially in the face of policy changes and market sentiment fluctuations, we can still observe that Bitcoin, as a scarce asset, holds tremendous potential in the future financial ecosystem.
We must also acknowledge that from the long-term expectations of the S2F model, to the gradual growth of the power law model, and to the market signals of the ahr999 index, they together constitute a predictive framework in the cryptocurrency realm, providing investors with the most crucial confidence. HODL is not an easy task, and these robust yet simple models give retail investors a theoretical basis for becoming diamond hands.
As we have just analyzed, all these predictions cannot completely avoid market uncertainties. The future price trend may be elusive, but it is precisely this uncertainty that makes Bitcoin so attractive. It is not only an experiment in the financial realm but may also become an important part of the new global economic order.
On this challenging and opportunistic road, we cannot reveal Bitcoin's future price in one fell swoop. However, through continuously improving models and innovative analytical methods, we seem to be getting closer to the truth. In this game, each of us is like a sailor holding different maps, but the ultimate destination remains an unknown distance away.
