Bayern LB, Germany’s seventh largest bank based in Munich, has released a report which largely compares Bitcoin (BTC) with gold. According to the bank’s team of researchers, Bitcoin will hit $90,000 in 2020.

The report, titled “Is Bitcoin outshining gold” puts Bitcoin’s stock-to-flow (SF) ratio as well as the upcoming halving, as the main factors that will drive this surge. The SF basically describes the “hardness” of an asset, referring to availability and scarcity. It takes into consideration, the amount of the asset that has been produced in a year, as it relates to the amount currently available at any given time. This means that assets are more valuable when they have a high SF.

“Historically speaking, it has invariably been the commodity with the highest stock-to-flow ratio at that juncture which has been used as money because this enabled the best value transfer over time.”

Another event expected to help Bitcoin surge is the upcoming halving. After every 210,000 blocks are mined (which takes around 4 years each time), the Bitcoin block reward is cut down by half. This increases scarcity and improves the coin’s price. The Bayern LB however expects that Bitcoin’s current SF will more than double, boosting its price. The increase will see Bitcoin’s SF of about 25.8 going as high as 53, just 5 points lower than gold’s current 58. The report then notes that:

“If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000”

Generally, this is some good news, considering the recent trajectory Bitcoin has been on, especially since the Bakkt launch.

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