For Raoul Pal, former director of Goldman Sachs, Bitcoin is not a cyclical asset like oil and other commodities, and its price is based on an adoption model, the future of which is to move “up and to the right.”
As for the halving, an event that halves mining rewards, the macromarket guru says that could be a factor. Keep in mind, though, that the halving only makes sense because it’s correlated with liquidity, the main factor determining price.
In addition, it is worth remembering that there are other models that try to price Bitcoin. While there is no magic formula, some of them can give you a better understanding of this market.
Liquidity attracts capital, driving Bitcoin’s price up
While Real Vision founder Raoul Pal looks for investment opportunities using macroeconomics and market cycles, things are completely different when it comes to Bitcoin and other cryptocurrencies.
For this guru, Bitcoin’s price is guided solely by M2, i.e. the amount of money in circulation in the economy. Therefore, as M2 is only getting bigger, the trend is for Bitcoin to continue to grow.
“Crypto is not driven by cycles, but by global liquidity, the global deviation from the M2 trend.”
“Liquidity drives cryptocurrencies. Remember, this is not a cyclical asset, so it doesn’t go back to where it was, like oil and commodities.” Raoul Pal points out. “It’s a network adoption model that goes up and to the right over time.”
As for volatility, the former Goldman Sachs executive points out that it is also related to the variation in the M2 trend, as can be seen in the chart below.
As for the halving, considered by many to be one of the major events affecting Bitcoin’s price, Pal claims it is related to liquidity. However, keep in mind that halving as a precursor is not necessary.
“You bring more liquidity into the markets, allowing more people to allocate capital to them, in a low-supply environment.”
Several models are trying to price the price of Bitcoin
In addition to Raoul Pal’s model, which takes advantage of the variation of the global money supply and the scarcity of Bitcoin, several other models have been created to try to determine the future price of Bitcoin.
Among the most famous are the Stock-to-Flow (S2F), created by Plan B, criticized by many investors, as well as the rainbow chart, which analyzes bitcoin on a logarithmic scale and predicts an exponential price increase.
Finally, while there is no magic formula to determine the price of Bitcoin, such models deserve the attention given to them. Moreover, it is hard to imagine that BTC does not have a prosperous future as governments will continue to destroy their currencies with inflation.
Source: Live Coins
John Cameron is a journalist at The Nation View specializing in world news and current events, particularly in international politics and diplomacy. With expertise in international relations, he covers a range of topics including conflicts, politics and economic trends.
