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Following a significant haircut in May, the price of Bitcoin has been meandering between $30K and $40K for the better part of a month. While some analysts are relieved at the fact that Bitcoin has not crashed through the $30K support line, and, heck, may even be building momentum to move back above $40K, others are not so sure about the future of BTC.

On the other hand, Bitcoin’s 7-day chart appears to have crossed into green territory for the first time in a great while. At press time, BTC’s 24-hour gains were sitting at roughly 2.6 per cent, while the seven-day price chart showed gains of 1.4 per cent.

Some Good News for Bitcoin

Additionally, Bitcoin has seen a bit of positive news in recent weeks that may be bolstering its price after it collapsed in May. On Wednesday, the nation of El Salvador became the first country in the world to adopt bitcoin as legal tender.

Michael Sonnenshein, the Chief Executive of Grayscale Investments, said on CNBC’s ‘ETF Edge’ earlier this week that: “As we think about nation states and central banks exploring digital currencies, we’re not surprised to see places that have historically relied on the dollar or folks who have experienced hyperinflation exploring the potential merits of digital currency.”

“We would not be surprised to see states and central banks beginning to think about adding bitcoin and other crypto to their balance sheet.”

Additionally, the conclusion of the Miami Bitcoin conference seems to have pumped a new bout of enthusiasm into the cryptocurrency industry (though positive COVID test results may be a mitigating factor).

Speaking of the event on the same episode of ‘ETF Edge’, Osprey Funds founder and CEO, Greg King said that: “It feels a lot like 2017 felt but with a broader base. It’s taking the movement forward from where it’s been over the last 12 years.”

Beyond El Salvador and Miami, a group of North American Bitcoin mining companies formally debuted The Bitcoin Mining Council on Thursday with the goal of addressing concerns about the amount of energy used in cryptocurrencies.

“The Bitcoin Mining Council is a voluntary and open forum of Bitcoin miners committed to the network and its core principles,” MicroStrategy Inc. Chief Executive Officer, Michael Saylor, who helped to form the association, wrote on Twitter, with a call to “Join us.”

What Does Bitcoin’s Stock-to-Flow Model Say?

Bitcoin’s stock-to-flow model has hit a rebound level that has not been seen since Bitcoin’s all-time high in 2017, a factor that some investors and market participants could find relieving after a month of price stagnancy.

“It’s a long time since [Bitcoin’s] price has been this far below [the stock-to-flow] line,” wrote Philip Swift, Creator of LookIntoBitcoin, on Twitter. “The Divergence oscillator at [the] bottom of the chart is highlighted by the orange dotted line and arrows to show comparable historical periods…#bitcoin price rebounded hard from such divergence previously (sic).”

A stock-to-flow measures the relationship between the currently available amount of an asset and its production rate. While this model is typically applied to commodities (i.e. precious metals), some analysts have applied it to Bitcoin: the amount of circulating BTC available is measured against the amount of new BTC that are being mined.

How Effective Is Bitcoin’s Stock-to-Flow Model?

The purpose of a stock-to-flow model is to show how much supply of an asset or resource (BTC, in this case) enters the market each year relative to the total supply. According to Binance Academy, “the higher the Stock to Flow ratio, the less new supply enters the market relative to the total supply.” And, therefore, an asset with a higher Stock to Flow ratio has higher scarcity, and should therefore retain value well over the long-term (at least, in theory).

Measuring Bitcoin’s price against stock-to-flow appears to have been originated by a pseudonymous Bitcoin institutional investor who goes by the name PlanB. While Philip Swift optimistically compared what is happening in the stock-to-flow model at this current moment with what happened in 2017, CoinTelegraph reported that even PlanB is nervous about the future of Bitcoin.

According to CoinTelegraph, this model “has been widely praised and is the leading valuation model for bitcoin proponents.” However, some analysts find the model to be fundamentally flawed.

“SF has achieved viral popularity and inspired rags-to-riches dreams for those gambling it all on the future of bitcoin,” CoinDesk reported in June of 2020. “However, we believe the model’s accuracy will likely be about as successful at forecasting bitcoin’s future price as the astrological models of the past were at predicting financial outcomes.”

2013 All Over Again?

However, if the stock-to-flow model is to be trusted, PlanB said on June 1st that while Bitcoin’s latest price movements do have some similarities with 2017, Bitcoin’s latest price movements are much more reminiscent of the year 2013.

“New dot: May close $37,341.. -35% .. we knew bitcoin would not go up in a straight line and several -35% drops are possible (and indeed likely) in a bull market,” he wrote on Twitter, adding that BTC’s movements were “Starting to look like 2013. [Stock to flow] model intact.”

However, while there are some important differences between Bitcoin’s price movement in 2013 and its movements in 2017, both years have something important in common: each of them saw a two-tiered run-up to a new all-time high. According to CoinTelegraph, “The first peak was followed by a significant drawdown in each instance, which then reversed to spawn a run to a new top.”

If history repeats itself a third time, Bitcoin’s second bull run of 2021 will take place later this year, which could lead BTC far beyond its previous all-time high of roughly $60K. In fact, PlanB believes that $100,000 is still in the cards for BTC. The stock-to-flow calls for an average price of either $100,000 or $288,000 between 2021 and 2024.

“Everybody Wanted to Buy #Bitcoin at $60,000, Nobody Wants to Buy Now.”

However, not everyone is so optimistic. Fortune reported this morning that Bookmakers at US-Bookies.com have “raised the odds that Bitcoin drops to $10,000 this year to 8-to-11—a 57.9% implied probability.”

And indeed, BTC investors seem to be fearful that Bitcoin is in for further drops down the line.

BItcoin market analyst, Michaël van de Poppe (@CryptoMichNL) wrote on Twitter that: “Everybody wanted to buy #Bitcoin at $60,000, nobody wants to buy now. Why? People are scared of red candles and expect a further dip.”

However, as BTC loses its grip, altcoins appear to be stepping up to the plate. At the beginning of 2021, BTC’s market dominance was over 70 percent. At press time, that figure had fallen below 44 percent.

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