How accurate is the Bitcoin Stock-to-Flow Model?

What is the Bitcoin Stock-to-Flow Model?

Created by a pseudonymous Bitcoin investor known as PlanB on Twitter, the Bitcoin stock-to-flow model compares the current stock (supply) to its annual production rate. A high ratio indicates scarcity, which should result in a high price.

How Does the Stock-to-Flow Model Work?

The stock-to-flow model uses a simple formula where you divide the current supply (stock) of an asset by its yearly production (flow).

How Has the Stock-to-Flow Model Performed?

Historically, the Bitcoin stock-to-flow model has come close to predicting bitcoin’s price accurately, as indicated in the chart below. PlanB published this chart in 2019.

Why is S2F Suddenly So Far Off?

Experts believe that more factors have come into play. For example, there has been a dramatic increase in demand since PlanB first published the bitcoin S2F model in 2019. Institutional and retail investors have flooded the market, boosting bitcoin adoption. Moreover, NFTs gained mainstream popularity in 2021, attracting more people to the crypto markets.

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