Bitcoin could be on the rise at spot rates, surpassing $60,000 as momentum builds. However, from a technical analysis perspective, bulls need to do more.
The main thing is to break through the local resistance level around $63,000. A decisive and high-volume close above this liquidation zone will confirm the buyers of August 8 while confirming the possible recovery in the first quarter of 2024.
Bitcoin Could Hit $500,000 If Inflation and Dynamic Supply Are Factored In
A bullish close, pushing the valuation above $66,000, $72,000, and even all-time highs, could likely reignite demand, pushing prices to new highs by the end of the year. Most traders expect Bitcoin to rally slightly, especially now that the U.S. Federal Reserve is planning to cut interest rates, ushering in an accommodative monetary policy.
With Bitcoin being touted as a hedge against inflation, an analyst speaking to X notes that the coin’s valuation should be much higher if all influencing factors are taken into account. In a post, the analyst said that by factoring in inflation and the evolution of Bitcoin’s supply based on the power law model, the world’s most valuable coin should be worth much more by 2029.
According to the analyst’s findings, traditional power law models, although popular for predicting the price of Bitcoin, tend to neglect the impact of inflation. At the same time, price predictions using this model do not take into account the increase in BTC supply.
However, if these gaps are filled and the power law model is reworked to take into account the above metric, then by 2029, BTC could reach $500,000, which is 66% higher than previous estimates. In this improved model, using Bitcoin market cap as a proxy for value proves essential.
Metcalfe’s Law and the Impact of Institutional Demand
This approach is closely related to Metcalfe’s law and the network effect. This law states that the value of any network, in this case BTC, is directly proportional to the square of the number of adopting users.
While the market is not a perfect measure, it does offer a more accurate representation of Bitcoin’s intrinsic value. According to the analyst, it is more effective in measuring BTC’s intrinsic value than relying on the spot price.
Beyond inflation, traders expect inflows via spot ETFs to boost valuations as seen 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 its launch in January 2024.
Main image from Canva, chart from TradingView