Bitcoin‘s price appreciation went for a toss earlier today when the top cryptocurrency hit a weekly low of $41,700. While most of this volatility can be attributed to new inflation-related comments by the Federal Reserve, some are fearing that resistance may be stronger this time around.
However, leading investment management company Fidelity has remained bullish on the digital asset, even saying in its recent report that BTC can be fundamentally distinguished from all other digital assets outpacing the market.
On a recent podcast, Fidelity’s Director of Global Macro Jurrien Timmer reiterated his company’s position by noting that the blockchain trilemma of ensuring scalability, security, and scarcity doesn’t plague Bitcoin like it does newer blockchains such as Ethereum.
“Bitcoin is not the same as Ethereum. I think there is a place for both, but I wouldn’t even consider them the same asset class.
According to the exec, apart from having scarcity and supply components, Bitcoin also has the network effects component working in its favor. This is where the asset really derives its value from, Timmer added.
“Bitcoin is the only asset class where you have both this scarcity of supply and this exponentially growing demand. Ethereum has one but it doesn’t have the other although they are certainly trying to going in that direction… maybe that’s the direction they’re going now in terms of managing supply growth, but that doesn’t mean it won’t change in the future and of course , Bitcoin cannot be changed, it is immutable.
The exec arrived at this conclusion by combining the stock to flow and S-curve models, both of which are considered holy indicators by many. Here, the former analyzes BTC’s supply dynamics by factoring in its scarcity. The S-curve analyzes adoption to determine how it is performing compared to previous technologies such as the Internet, mobiles.
Although the S2F model has been widely used for $100,000 projections, its failure to “indicate exponentially higher prices” has led to skepticism. This can be corrected by considering the demand for the asset, because “if there is no demand for something, it doesn’t matter how rare it is”.
He explained that by comparing Bitcoin’s adoption curve through its number of active addresses over the past decade with historic internet adoption and mobile subscription, “what you get is this exponentially growing curve.” Positioning both curves together gives a price prediction of $100,000 in the next two years.
“This number just comes from the intersection of these two patterns because that’s the last time the supply pattern and the demand pattern meet and from that point on the demand pattern goes up and those two lines begin to diverge for good.”
