In a recent interview with Jay Gould, Crypto proponent, Willy Woo shared his thoughts on a multitude of facets in regards to Bitcoin. Willy has been a strong voice in the Bitcoin community and in the interview, he spoke about how Bitcoin has changed his life, and how things will change in a larger perspective of things.
Bitcoin Cycles
One major point of interest that was touched upon was Bitcoin cycles. Willy talks about how Bitcoin cycles are getting smaller and smaller, calling them “like little ripples, no more 4-year cycles.”
When speaking about Bitcoin cycles, Jay asked Willy about what he thinks the potential is, whether growth would diminish with the parity with gold in terms of the CAGR (Compounded Annual Growth Rate), or if he believes in hyper-Bitcoinization, where it reaches 100 or 200 trillion.
Willy answered that it was a little over-optimistic to think so. He indicated that the future of the U.S dollar is still undecided with respect to Inflation. According to Woo, Bitcoin is consolidating with the 1 trillion dollar mark, and getting past it would create much legitimacy.
The analyst further elaborated that the growth from 1 trillion to the gold cap, which is around 11 trillion USD, will be relatively smooth, and beyond that growth would be slow. Earlier, he had conducted a Twitter poll asking his audience what value Bitcoin would reach, and the consensus was 40 trillion.
Speaking about the deviation of Bitcoin’s trend line, Woo stated that the market had diluted due to the availability of other digital assets. He said,
“In 2015 we saw the launch of Ethereum, and hence there was a major deviation in Bitcoin’s straight trend line. And 2021 saw the line deviate even further due to there now being thousands of what he calls “sh*t coins”.
Stock-to-Flow; Still relevant?
Willy Woo also mentioned that the stock-to-flow ratio views Bitcoin as an asset class. Stock-to-Flow or S2F is a ratio that allows investors to compare the scarcity of an asset. S2F was conceptualized by an anonymous quantitative analyst who goes by the name of Plan B.
Willy believed that fundamentally Plan B’s idea is a good one, however, it was formulated with a maximalist mindset. Hence the model “breaks down” because if Bitcoins get to zero inflation, the price would go to infinity. The model should add a factor for the competitors in the market, which presently, there are plenty of.
Woo believed that the S2F model is not based on “supply and demand”, but rather “scarcity and valuation”, if there is a scarcity, there is a dynamic in supply and demand. The availability of other coins has diluted the scarcity of Bitcoin, said Willy.
Due to the deviation of Bitcoins straight growth, Willy does not believe that BTC could give the formulated 110% annual return. Willy is of the opinion that the CAGR for Bitcoin is below 100%, but over 50%. This should ideally be the case for the next 5 years, before a deceleration. However, he added, that it is difficult to predict and that there are a lot of factors that come into play while speculating on Bitcoins growth.