The drop in the price of Bitcoin shows that metrics such as SF2 are not helpful. The macroeconomic situation has been one of the primary reasons for the current value of the cryptocurrency.
Every day, there are postings of predictions about the price of Bitcoin (BTC), the leading cryptocurrency in the market. However, even some metrics and analysts hitting the nail on the head on other occasions have erred.
For example, the tool Stock to Flow (S2F) predicts the Bitcoin price by dividing the issuance of the cryptocurrency by the annual production.
That metric has predicted moments like the correction from May to July 2021 but suggests Bitcoin will reach USD 72,000 this week. Since that projection is unlikely in the current context, the co-founder of Ethereum, Vitalik Buterin, has criticized Stock to Flow.
The pioneering cryptocurrency is down as inflation and measures against it increase in the United States and Europe. BTC has traded between USD 20,000 and USD 22,000 for six days, so specialists are watching whether it will rise or drop.
According to Fidelity, SF2 is no longer accurate as it is almost impossible to calculate the future adoption rate of Bitcoin. The current drop has been among the highest in the market, but many metrics and specialists did not anticipate it.
Various analysts predicted that the price of Bitcoin would reach a new all-time high at this time, contrary to its current bearish trend. Even specialists who have closely guessed its price on different occasions have failed.
Last year, Carlos Maslatón said that Bitcoin would be worth more than USD 120,000 in June 2022. However, he has been right in his predictions at other times, which has allowed him to become rich as an investor. He argues that he has succeeded due to his analysis of the human behavior of traders.
The Predictions Cannot Depend on a Single Metric or Person
In this context, the lesson is that the price of Bitcoin depends on a confluence of factors. Therefore, its predictions cannot base on a single metric or the vision of an analyst.
It is possible to observe that despite the growing institutional adoption and interest in BTC, its price has fallen freely. Economist Jose Sarasola explained that the economic-political context and the fear caused by some events are the main reasons.
It is crucial to understand that it is impossible to predict the price of BTC based on a single factor. It is convenient to use various metrics and follow the behavior of Bitcoin investors to foresee its movements.
It is possible to predict the price movements of Bitcoin more accurately by knowing the reality impacting the market. Since nobody has the crystal ball to predict the future, it is necessary to consider the possible risks.
BTC is trading at around USD 20,079 and has accumulated a 1.4% loss over the last 24 hours. While its daily trading volume is above USD 20.29 billion, its market capitalization is about USD 383.29 billion, according to CoinGecko.
By Alexander Salazar
