Bitcoin (BTC), like the rest of the digital asset market, has been rocky throughout 2022. The cryptocurrency started the year at around $46,700 and is down over 64% at $16,560 at the time of writing. As a result, the coin’s market cap dropped from about $900 billion on January 1, 2022 to about $320 billion.
Bitcoin’s price decline could be attributed to the unusual conditions experienced by the cryptocurrency market as a whole this year, but it is important to reassess 2022 price predictions by various market entities. One of the predictions was that of analyst PlanB’s Bitcoin Stock-to-Flow (S2F) model.
The S2F model predicted that BTC will reach nearly $110,000 by December 2022. The cryptocurrency ended his year almost 85% below target, raising questions about the validity of its pricing model. Stock-to-flow models are typically used to price commodities in traditional markets because they consider two variables related to assets (stock and flow). “Stock” refers to the existing total supply of an asset, while “flow” refers to the new supply of an asset created each year.
Antoni Trenchev, co-founder and managing partner of digital asset management platform Nexo, shared his thoughts on the validity of the S2F prediction model with Cointelegraph.
“There are many factors that can affect the price of Bitcoin, such as market demand, regulatory changes, and technological developments. The S2F model is one of the tools that can be used to predict the future price of Bitcoin. One, but it’s important to note that this is based on certain assumptions and is not a definitive guide to the future.”
Besides S2F, other models have been used to predict the price of Bitcoin in the near and far future. The most well-known are the Elliott wave theory and the super wave theory. Both are rooted in traditional financial markets, but have relatively limited success in predicting the price of BTC.
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Considering that Bitcoin started its journey as an asset only 10 years ago, Bitcoin is still a price discovery when compared to commodities like gold and silver and major technology stocks like Apple and Microsoft. It is no exaggeration to say that we are in the early stages of Therefore, while there are various BTC price predictions, it is essential to remember the limited availability of circulating data to take these models into account.
Trenchev added that there are various models and approaches that can be used to predict Bitcoin price. Some people use technical analysis. This involves examining historical price and volume data to identify patterns and trends. Others use fundamental analysis, which involves assessing underlying factors that may affect the demand and supply of an asset. There is no single model or approach that is generally considered the most reliable for predicting Bitcoin price, and it is important to consider various factors when making investment decisions.
Related: The 3 Most Controversial Bitcoin Price Models and Their Predictions
Alex McCurry, CEO and co-founder of blockchain solutions provider Solidity.io, agreed with Trenchev, telling Cointelegraph: The only thing we can be sure of about Bitcoin is the fundamental value underlying the Bitcoin network and the value it presents to owners and investors. Although it can be predicted, it is impossible to perfectly time the exact price. “
However, one important aspect could change Bitcoin price trends. it’s a utility.
Since Bitcoin is not a network compatible with smart contracts, the asset’s utility is limited to payment rails. This is slowly starting to change, and Bitcoin, powered by the Lightning Network, is finding more utility than ever before.
LN is a Layer 2 payment protocol built on the Bitcoin network that enables fast and seamless peer-to-peer transactions. This greatly improves network scalability. Most recently, Michael Saylor’s MicroStrategy announced plans to release Lightning Network-powered software and solutions in 2023.
MicroStrategy also continues to add Bitcoin to the Treasury. Between November 1st and December 21st, 2022, the company acquired his 2,395 BTC at an average price of $17,181 for a total of $42.8 million. For tax reasons, the company said that on December 22, he sold 704 BTC at $16,776 per coin, for a total of $11.8 million. As a buyback, the company bought him 810 BTC on Dec 24 for $13.6 million in cash.according to data From BitcoinTreasuries, this brings the company’s holdings to 132,500 BTC, worth around $2.2 billion at the time of writing.
Global Investment Manager VanEck release 11 cryptocurrency predictions for 2023. In it, BTC claims he will fall to $10,000-12,000 in the first quarter “amid a wave of minor bankruptcies” and then recover to $30,000 in the second half of 2023.
McCurry agreed with this prediction, stating, “I believe Bitcoin will recover in 2023, and by 2024 Bitcoin will hit a new all-time high well above its 2021 peak of $69,000. Let’s go,” he said.
“It is possible that the Bitcoin price will recover to $30,000 in the second half of 2023, but we are aware that the Bitcoin price is highly volatile and can be affected by many factors,” Trenchev said. It’s also important to keep in mind.”
Derivatives Market and BTC Price Discovery
Bitcoin’s price is unpredictable and volatile, but the asset derivatives market is a key indicator of current and future sentiment.
according to data According to Coinglass, the current open interest (OI) of the Bitcoin futures market is over $9 billion.At the same time, the open interest in the Bitcoin options market is stand At $3.4 billion, it accounts for over 76% of OI on crypto derivatives exchange Deribit.
Luuk Stijers, Chief Commercial Officer at Deribit, spoke with Cointelegraph about what 2023 options data will reveal about the market’s price sentiment on Bitcoin.
“The overall put-to-call ratio for June 2023 is 0.24, which is pretty low. This usually means bullish sentiment. Calls are three times more outstanding than puts. Biggest pain at $19,000. , also indicates an upside potential.Investors have positioned the larger strikes ($20,000, $25,000 and $30,000).The premiums for the higher strikes are clearly much lower, so these are considered upside bets. or may be used for yield generation by call sellers.”
The maximum pain price is the price point at which the maximum number of options are lost. Stijers also added, “Since the FTX demise, investors seem to be on the sidelines, awaiting not just industry news, but also macroeconomic news. Implied volatility has hit new lows. , in the short term it’s currently trading in the early 30s, even in daily newspapers it’s trading below 30%.At the same time, liquidity is lower than normal right now.”
Market uncertainties aside, regulations slated for 2023, namely the European Union’s Crypto Markets Bill and the US’s Lumis Gillibrand and Warren Marshall Bills, could bring stability to markets. . The director will probably feel more confident.
This article does not contain investment advice or recommendations. All investment and trading moves involve risk and readers should conduct their own research when making decisions.