The bitcoin (BTC) stock-to-flow (S2F) model is a well-known popular model that compares the relationship between the production of the crypto coin and the existing supply. It is mainly used to analyze the scarcity and potential future price movement of bitcoin. The model was introduced and popularized within the bitcoin community by Dutch analyst PlanB.
The model is especially popular among long-term investors. Although crypto is generally very volatile, and the price can fluctuate in the short term, historically there has been a clear upward trend over the years. The special thing about bitcoin is that the flow, or new production of bitcoins, is halved approximately every four years in the event known as the “halving”. This means that Bitcoin’s S2F ratio is regularly increasing, suggesting that scarcity is also increasing.
The past rhymes
In the PlanB model, the course of the BTC price is plotted against the S2F model. The different colors, from blue to red, have to do with the number of days that the next halving is coming up. A number of trends emerge from the graph.
One of many bitcoin scenarios … pic.twitter.com/7qOOqoEWzO
— PlanB (@100trillionUSD) August 13, 2023
First, we see that the peak of the market is approximately between the two halving events. This contrasts with the price development of the S2F model, which is shown in grey. In reality, therefore, there appears to be a delay in the price trend. Second, the market appears to be reaching a new low before the halving and then continues its upward trend into another bull market. Finally, it is striking that the peaks decrease relatively compared to the S2F model. Over time, BTC increases in price less in percentage terms. Not surprising, given that the market capitalization is increasing and more and more money is needed for a price increase.
What can we expect?
If we continue the line with a long-term view, it is expected that the price will only increase from now on. We are expected to see a new BTC peak around the end of 2024 or early 2025. If it is up to the S2F model, the price could just end up in the several tons. Whether that will actually happen remains to be seen.
2023-08-13 18:35:15
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