There’s „too much money to spend,“ and this will help the price of Bitcoin (BTC) reach its next phase of huge price increases, analysts say.
In a blog post on August 25, Jeroen Blokland, portfolio manager for the asset manager Robeco, pointed out that the M2 indicator of the speed of US money (a measure of money in circulation in the country) had reached historical lows.
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There is „too much money to spend
The speed of money measures how fast it moves through the economy, and 2020 has seen a drop in the metrics.
„Theoretically, the speed of money increases when economic activity increases,“ Blokland wrote.
„While the sudden economic downturn obviously resulted in much lower economic activity, the sharp drop also suggests that there is too much money to spend. A quick look at central bank balance sheets confirms this.
The Federal Reserve’s massive money-printing activities alone have characterized the period since March, when the coronavirus caused the cross-asset market to fall.
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As Cointelegraph reported, the increase in central bank balances in the G4 nations has occurred in parallel with the increase in safe haven assets: Bitcoin, gold and silver.
For PlanB, the quantum analyst behind Immediate Bitcoin stock-to-flow price forecasting models, the collapse of the speed of money will only serve to accelerate the path of the world’s largest kryptonie to recent predictions: an average of $288,000 by 2024.
The cross-asset stock-to-flow (S2FX) model delivers multiple „phases“ of Bitcoin as an asset, and the $288,000 price is part of phase five.
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PlanB tweeted in March „S2FX: USD 288,000 is the center of the accumulation (S2F is the centroid market value) of the next phase, as USD 6,700 was the center of the accumulation of the past/current phase,“ when commenting on an explanatory chart.
„We do not know exactly (yet) when phase 5 begins and ends, but looking at past accumulations: approximately 6 months after the 2020 halving, until the 2024 halving plus about 6 months“.
Meanwhile, Blokland warned about the impact of low speed on financial policy. This week, the Federal Reserve announced plans to raise its inflation target to 4%.
He added, „The low speed of money also means that even more money is needed to create inflation. So far, however, this has only resulted in asset price inflation.