Bitcoin (BTC) is back at great heights after the positive news of the approval of the first US exchange traded fund (ETF). Reason for the Dutch analyst PlanB to update his followers about the status of his stock to flow (S2F) fashion model. We also see a on chain signal that in the past preceded huge bitcoin price increases.
‘Back in the blue’
PlanB’s application of S2F to bitcoin is very popular within the crypto community as it has been predicting the price quite accurately for a long time. His model shows an average expected bitcoin price based on the S2F concept. In general, BTC follows this line, but of course we see fluctuations every now and then.
In recent times, bitcoin has been moving quite far below this line, raising fears that the model might break. But with the recent upward movement, bitcoin is very much in the blue zone again, according to PlanB!
Back in blue https://t.co/ikLpgKX5gi pic.twitter.com/oVavXRQXFi
— PlanB (@100trillionUSD) October 18, 2021
As can be seen from the chart, according to S2F, bitcoin should be trading around $100,000 and when we look at the past, we see that BTC never traded far below the S2F line for long. Do we have a few beautiful months ahead of us?
On-chain signal turns green
On top of the positive developments regarding the S2F model, we see another positive signal. The MVRV z-score has exceeded 3.0. MVRV is a metric based on the market capitalization divided by the realized market capitalization to get an idea of whether bitcoin is over or under valued. According to Capriole Investments founder Charles Edwards, this metric now paints a striking picture, one we last saw before the big breakout in late 2020:
Historically, Bitcoin went parabolic over the next 1-2 months every time MVRV z-score regained 3.0.
Bitcoin Just Reclaimed 3.0”
Historically every time MVRV z-score reclaimed 3.0, #Bitcoin went on a parabolic price run for the next 1-2 months.
Bitcoin just reclaimed 3.0 pic.twitter.com/luCBnubYIs
— Charles Edwards (@caprioleio) October 18, 2021
It remains to be seen how the news about the approval of the first US ETF will turn out. One possibility is that it is a buy the rumour, sell the news event meaning that the price will go through a correction once the fund actually goes live.