image by Brands&People
With Bitcoin turning the corner, one question that I’ve seen floating around the past week is:
“So how do we get to $100k?”
There are still many people who are still blissfully unaware of how the current financial system works and don’t understand what Bitcoin (BTC) and Crypto really mean for society. This isn’t meant to be a “I told you so” moment, I say this because of the people who have actually entered the space and have already begun to understand how well incentivised systems work.
If you are one of these people, well done, you are still early and the laser eye - initial $100k target is well within sight.
I say initial, because I see the price of BTC going much higher. There will come a time when we price satoshi’s and not a whole coin. For future and longer term projections, I’d highly recommend you look at the great work PlanB has done in this space with the BTC Stock to Flow (S2F) model.
Back to the main question, how do we get there? As I mentioned, I believe it is inevitable, when we look at Ethereum (ETH) in closer detail, it gives us a clue on how we achieve the milestone.
Do you remember how many ETH were required to become an “ETH2.0 Validator Node”? The answer is 32. The first stage (Beacon Chain) went live on 1st Dec 2020 (closed trading at $586 on the day). So a full node (32 ETH) would have cost you $18752. Do you know what BTC closed at on the 1st Dec 2020, the answer is $18771.
Therefore, on the day that ETH2.0 went live, 32ETH = 1BTC.
The chart below (Fig1) shows this 32:1 ratio on go-live day, also very interesting is the volume profile (volume by price), notice how the point of control (POC) is 32. This basically means that most volume in this series was done at 32:1 ratio. In this chart, it appears that BTC is currently undervalued compared to ETH.
Fig1 - 1/ETHBTC (number of ETH to buy 1 BTC)
Next let us have a look at the price of 32ETH. In Fig2, you will see that on the 1st Dec 2020 the price was $18742, as stated above. It has climbed to over $100k in early May 2021 and currently the price of an “ETH2.0 Validator Node” (32 ETH) is back over $100k.
Fig2 - 32*ETHUSD
(Price of 32 ETH or an “ETH2.0 Validator Node”)
Next, lets look at the 4 year ratio of 1BTC / ETH2.0 Validator Node (i.e. 32 ETH). In Fig3, pay close attention to the POC value. It is 1, confirming again that the ratio of 32:1 is highly significant and that BTC is currently under valued relative to ETH.
Fig3 - BTCUSD / 32*ETHUSD
(Bitcoin / ETH2.0 Validator Node ratio)
Next you might ask, how undervalued is BTC relative to ETH. For that we use Fig4. Here we simply subtract the price of 32 ETH by 1 BTC. When the beacon chain went live the difference between the two assets that cost over $18k was only $29, today it is over $57k.
Fig4 - 32*ETHUSD-BTCUSD
(Difference between 32ETH and 1BTC (On the 1 Dec 2020 the value was just under $29)
Fig5 - 32*ETHUSD-BTCUSD (Log)
The log view of the above chart, see Fig5, suggest that we can expect the 32:1 ratio to be tested again and again in the future as it has been in the past. With all this said we can do the projection in the reverse. I.e. we can take the price of BTC as the constant and we can project that the price of ETH should fall to ~ $1450 (BTC at ~$46500 / 32).
This is however not what we set out to do. We set out to show how BTC could get to $100k. From the charts and analysis above I think we can agree that the ratio of 32:1 is very important. That BTC appears undervalued relative to ETH. With ETH2.0 staking, burning of ETH as result of “London” upgrade and DeFi draining ETH from exchanges, do you really see the price of ETH falling too far from here. That said 32 ETH is over 100k, so a little catch up from BTC will get us there too!
Laser eyes aren’t that silly after all.
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This blog is dedicated to my mate “pigeon”
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