German bank BayernLB predicts a major leap for Bitcoin in 2020.

The state-backed bank based in Munich has published a report on Bitcoin vs gold, that suggests the upcoming Bitcoin halving effect hasn’t as yet been priced into the current price of around $8,300.

BayernLB says that gold has to earn its high stock-to-flow ratio “the hard way over the course of millennia,” reports Coin Telegraph.

Whereas in contrast, Bitcoin, the world’s largest cryptocurrency by market capitalisation, will likely achieve a similar stock-to-flow ratio to gold over the next year, as per the bank’s research report: “Bitcoin’s purely digital character enables “supply engineering,” which causes the stock-to-flow ratio to rise at a breakneck pace.”

Manuel Andersch, who wrote the report and is a senior FX analyst at the Bayerische Landesbank, says an asset’s stock-to-flow ratio can quantify the “hardness” of the asset.

Andersch stated: “Historically speaking, it has invariably been the commodity with the highest stock-to-flow ratio at that juncture which has been used as money because this enabled the best value transfer over time.”

The Coin Telegraph report goes on to say that the stock-to-flow ratio of a commodity like gold is the amount of the asset that is kept in reserves, divided by the amount that is produced each year.

Andersch then looked at the future price of Bitcoin, adding that the cryptocurrency’s stock-to-flow ratio will dramatically increase in May next year: “If the May 2020 stock-to-flow ratio for Bitcoin is factored into the model, a vertiginous price of around USD 90,000 emerges. This would imply that the forthcoming halving effect has hardly been priced into the current Bitcoin price of approximately USD 8,000.”

The report concluded: “Undoubtedly the biggest acid test for the stock-to-flow model will be next year’s halving. In the meantime, the stock-to-flow approach will serve, at any rate, as a good heuristic for understanding Bitcoin. It becomes clear that Bitcoin has been conceived as an ultra-hard type of money. In 2024 (when the next halving is due to take place), its degree of hardness will inexorably increase even further, to a level unprecedented in human history (a stock-to-flow ratio of more than 100).”