Huobi analysts deem PlanB’s Stock-to-Flow (S2F) model flawed — the Bitcoin price in the remaining days of November is unlikely to reach the projected $98,000. According to Huobi analysts, its author PlanB did not account for the normalization of monetary policy Fed.
Huobi Research: Why does the Bitcoin S2F model suddenly fail? PlanB ignored the impact of external macro changes. On the 3rd this month, Federal Reserve FOMC announced the launch of Taper, which means that the turning point of liquidity will be advanced. https://t.co/7LuRD102uY
— Wu Blockchain (@WuBlockchain) November 24, 2021
On November 3, the U.S. central bank announced the start of tapering of its monthly purchases of Treasury securities by $10 billion, and of mortgage-backed securities by $5 billion.
If these pace is maintained, the process would complete in eight months — by June 2022. After that a rate hike could follow. This would mean reduced liquidity and, consequently, a likely re-rating of risk assets.
Huobi emphasised that PlanB relied solely on Bitcoin blockchain data, but ignored the influence of external macroeconomic factors.
In their view, the large amount of liquidity under the QE programme in response to the COVID-19 pandemic spurred Bitcoin to record highs. Now the turning point for global liquidity has arrived.
Compared with the seven-year-ago events, liquidity in the global financial system has grown substantially. Huobi believes this will help avoid a sharp negative revaluation of risk assets. However, it will in practice hinder their further rise given the relatively high pace at which the inflow of “fresh money” is shrinking, the analysts added.
Against the backdrop of inflation accelerating to 6.2% year on year in October, calls within the Fed to speed up QE tapering grew louder. If implemented, analysts allowed for further declines in Bitcoin’s price.
In November forecast Bitcoin would reach $500,000.
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