A state-backed German bank has made a Bitcoin’s price prediction of $90,000 in anticipation of May 2020’s “halvening” of new supply.

In a research paper that cites Bitcoin Standard author Saifedean Ammous, German lender Bayern LB says the halvening, which will reduce the number of new bitcoins mined at a time from 12.5 to 6.25, will digitally expedite the process of inducing scarcity—the quality that made gold valuable over the course of many millennia.

No Other Demand-side Developments Can Distort Price Formation

You can calculate the value of said scarcity by taking the current number of bitcoins in circulation (“stock”) and dividing it by the rate at which new bitcoins are produced (“flow”). The theory goes that the higher this “stock-flow” heuristic is, the “harder” and more suitable for a currency the money is.

That’s because assets with low production relative to their supply run less risk of wanton inflation. Bitcoin’s case is unique, in that the asset is programmatically inhibited from increasing its supply—the bank speculates that a further bump to the stock-flow ratio from the halvening will increase the price. “Given that there are no other uses at all for bitcoins, no other demand-side developments (e.g. demand for gold in the spread of smartphones) can distort price formation,” Manuel Andersch, Senior FX Analyst at Bayern LB writes.