The Bank of New York Mellon Corporation (commonly called BNY Mellon), has released its March 2021 report. It covers various valuation frameworks for Bitcoin. The report has been published after it announced in February that the bank plans of creating a digital assets unit. BNY Mellon is the oldest banking institution in the United States that was founded back in 1784.
BNY Mellon’s report titled “Blending Art & Science: Bitcoin Valuations'' has carefully compared Bitcoin’s attributes to other currencies and monetary assets. This new report provides investors with new insights into the views of the USA’s oldest legacy financial institutions on digital money.
The report says:
“How do we place value on an underlying unit of measure? In today’s environment, where the intrinsic value of fiat currencies is increasingly being questioned, it is important to consider the value of alternative currencies such as Bitcoin. We believe there is demand for Bitcoin/crypto currency. While we do not attempt to derive a price target or formalize a valuation mode, we instead explore different analogies and dissimilarities that can be applied to Bitcoin and potentially other areas of crypto.”
The Bitcoin valuation report of BNY Mellon used the highly popular stock-to-flow cross-asset model (S2FX) to come to its conclusion on BTC valuation. One of the most important aspects explored by this report is the evolving narratives of Bitcoin over time. Nic Carter was the first person to explore this concept in a piece titled “Visions Of Bitcoin.”
The S2FX model used by BNY Mellon shows that Bitcoin is currently located in cluster 4. This model implies that Bitcoin is currently gaining more momentum in becoming mainstream. The analysts believe that Bitcoin is being seen more like gold. The report says that both the scarcity value and the subsequent halving of rewards after 4 years will ultimately drive BTC prices higher to that of the gold dot cluster as well as implied total market value. The report pointed out that the current surge in BTC prices took place just after the May 2020 halving, catapulting the price to the US$50,000 price range.
It also said:
“The creator of S2FX frameworks notes the financial milestones and phases passed by Bitcoin. Each phase is marked by an abrupt phase transition in how Bitcoin is viewed and utilized and also a cluster of higher prices. In the table below, we summarize each phase.”
This report is yet another positive endorsement of Bitcoin from Wall Street. However, it didn’t provide any specific price targets or future projections of the BTC price.
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