BNY Mellon Evaluates Different Methods Of Valuing Bitcoin

BNY Mellon evaluates different methods of valuing Bitcoin because the bank thinks it is worth understating despite its flaws so let’s read more in our latest Bitcoin news today.

The stock-to-flow model that we already know about is used to predict bitcoin’s price based on supply and issuance levels and though controversial, BNY Mellon evaluates another way to determine Bitcoin’s value because it is important to understand it. BNY Mellon took on another task of evaluating other methods of evaluating BTC in an investment report and in doing so, it came up with a controversial model that could see Bitcoin’s price hit $100,000 this year.

BNY Mellon’s thoughts on the matter are very important because it is the biggest custodian bank in the world with more than $25 trillion in assets and has a custodian role of expansion towards BTC and other cryptocurrencies as well. The research report “Blending Art & Science: Bitcoin Valuations” analyzed a few possible models for determining how much BTC is worth without anointing anything. After taking readers through valuation methods for gold and other assets that were used as both store of value and medium of exchange, the bank got into other valuation models and took models that were even panned by other analysts.

One method is the known stock-to-flow ratio which it says “is worth understanding despite its flaws.” The S2F ratio looks at the total current supply of an asset and divides that by the assets’ amount that can be mined in a year. it’s a model that can work with Gold and other precious metals but it did gain more traction in recent years among BTC supporters. The analyst and investor PlanB who came up with the S2F model explained that his model can be used to measure Bitcoin’s scarcity as well as its future value. Since the amount of BTC produced drops over time, the model will go up.

The stock-to-flow model is one of the bullish models for BTC price projections but it has its own flaws. For example, Nico Cordeiro who is the CIO of Strix Leviathan wrote:

 “We believe that the model’s accuracy will likely be about as successful at forecasting Bitcoin’s future price as the astrological models of the past were at predicting financial outcomes.”

BNY Mellon agrees that the S2F critics are right when they say supply doesn’t define the price. Ultimately, Bitcoin’s valuation will be a combination of several models and will be evolving especially in the mainstream.