Are you familiar with Plan B and its Stock-To-Flow (S2F) model? Then you will most likely be anxiously waiting for his predictions to come true. According to the anonymous crypto expert, it won’t be long before BTC hits $ 100,000.
That is why we do a small recap to see how the price stands against the S2F model. What can we expect in the near future and when will we hit that milestone?
S2F model and scarcity
The S2F model comes from the world of precious metals. In the calculation, the stock of the product (‘stock’) is divided by the annual ‘flow’ (new production). If the gold price is high, it is profitable to dig more gold. The price then decreases as a result of an increasing flow. The same goes for other precious metals such as silver, platinum and palladium.
The S2F model is therefore a mathematical formula for determining the price of a scarce commodity. With a maximum of 21 million BTC to be distributed, the digital currency is also one of the scarce commodities. In March 2019, there were 17.5 million Bitcoin in circulation. 0.7 million were added annually. The annual ratio at the time was 17.5 / 0.7 = 25.
Halving mei 2020
Thanks to the halving on May 11, 2020, the price of the Bitcoin got a huge boost. Two years ago, the price of 1 BTC was still $ 25K. Now the price is dangling around $ 60K. It looks like the digital currency will soon overtake the price of gold.
This has to do with the halving of 11 May 2020. This lowers the bitcoin flow: instead of 1800 bitcoins, only 900 pieces are still on the market every day. This increases the scarcity of bitcoins and therefore increases the price. The price is clear: since last year the price has increased by more than 900 percent.
The influence of the halving and the number of bitcoins in stock on the price of the coin can be seen in Figure 1. The blue line represents the decreasing supply of new bitcoins on the market. Due to the bitcoin block halving, inflation is decreasing. You can see that in the orange line.
Bitcoin inflation
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Drunk man with the dog
As often happens with new and innovative businesses, the S2F model of Plan B has been criticized from various quarters. Critics say the variables ‘stock’ and ‘flow’ do not apply to Bitcoin. For example, Australian statistician Nick Emblow stated that he lacked co-integration with other variables.
To explain co-integration, the metaphor of the drunk man (bitcoin price) with the dog is used. Both walk criss-cross (blue strip) on the road. Eventually they arrive home together through the strap that connects them. The bitcoin price therefore has peaks up and down, but will soon be at 100,000 dollars.
Stock-To-Flow Bitcoin
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Conclusion: $ 100,000 in 2021?
Is it really true that Bitcoin is on its way to that $ 100,000 or does this magical point turn out to be a mirage? Plan B supports his self-developed model. The day before yesterday, he shared a new graph on Twitter, which shows that this could be true next month. Put April 18 in your diary. Order the cake and the streamers.
Is the year 2021 the time to laugh at those ‘you are-too-late-for-crypto people’? Always keep in mind unexpected factors in the crypto market. This includes lawsuits, the closure of crypto exchanges by certain countries and the ban on advertisements about cryptocurrencies. Therefore, always spread your risk and never go all-in on just one asset.
If you keep these rules in mind and also enjoy investing or trading in crypto coins, there is only one thing to do: HODL on for life! Or for another month. What you want of course …
