BNY Mellon, the oldest bank in the US, is using the Stock to Flow (S2F) model and the similarity of Bitcoin to gold as tools to predict Bitcoin’s price. The bank is doubling down on its effort to dabble in Bitcoin, just months after it launched its in-house cryptocurrency services.
The bank has joined others in a trend completely different from that seen in the last few years. Previously, banks would steer clear of any crypto involvement aside from making brief and disparaging comments against Bitcoin and its ilk.
In February this year, for example, BNY Mellon opened its doors to institutional investors to use its financial services to access, hold and transfer cryptocurrencies. Barely weeks later, it also participated in a Series C funding round for Fireblocks, a digital assets custodian.
With the stock-to-flow model, the bank established that Bitcoin’s value is poised to keep rising astronomically, based on the current market stockpiles, and on the flow of new Bitcoins into the market. The calculations tabled in BNY Mellon’s report showed that Bitcoin has an S2F score of 20, meaning that it would take about 20 years for the current flow of new coins to match the available market supply.
In comparison, new supplies of gold would take around 50 years to match the circulating supply. This scarcity makes gold valuable. The bank uses the same yardstick to value Bitcoin. Per the calculations, Bitcoin’s price may rise to $288,000 per coin before the next halving, set to occur in 2024.