Probably the most cited price forecasting model for Bitcoin is being analyzed, but not for the creator of the stock-flow relationship.
“I will cancel the stock-to-flow model if we don’t get to $ 100,000 by December of this year.” The in June of PlanB, the creator of the Stock to Flow (S2F) relationship adapted to Bitcoin Twitter Ultimatum asked, returns now like a boomerang. The year just ended, and where exactly was the $ 100,000? And what good is a model that has repeatedly failed terribly? Even the record of around US $ 70,000 in November did not even come close to the six-digit exchange rate promised by PlanB. Not to mention December’s performance, with Bitcoin correcting to $ 46,000. The stock-to-flow model has failed, you might think. But for PlanB everything is going according to plan.
What is the stock-to-flow model?
Bitcoin is a rare commodity. There will only be 21 million bitcoins. There are currently more than 18.9 million BTC in circulation, just over 90 percent of all Bitcoin is already mined. The last Bitcoin should not be “mined” until 2140. This is because the reward per block for miners is cut in half every 210,000 blocks, roughly every four years, and the prospecting process is delayed accordingly. In 2009, miners received 50 Bitcoin for block generation, since the last halving in May 2020 has been 6.25 Bitcoin. The inflation rate falls continuously due to the cyclical halving.
The stock-to-flow model or the stock-to-flow relationship model describes the shortage of an asset based on the quantity in circulation that has already been achieved, the stock, plus the quantity in circulation that is added each year, the flow. The higher the stock / flow ratio, the rarer the good. Originally used for the valuation of commodities such as gold or silver, PlanB, which never published its real name, adapted the model to Bitcoin. Due to the successive throttling of the new quantity in circulation by the halving, the stock / flow ratio is constantly increasing. The central thesis of the Bitcoin S2F model introduced in 2019, which establishes a statistical connection between scarcity and price development, is therefore: Bitcoin is getting rarer and the limitation caused by Halvings is the main driver of prices. .
Bitcoin is unpredictable
The popularity of the model is explained by its bullish outlook: according to the model, the price of Bitcoin will rise to one million US dollars in July 2025. Music to the ears of all Bitcoin hodlers: reality would not thwart the bill . Back in 2019, PlanB went wrong. For the post-halving phase in May 2020, the merchant witnessed an increase to US $ 55,000. Right next door: Bitcoin slipped into the post-halving depression and struggled for months at the 10,000 mark.
The model is obviously flawed. The S2F model cannot predict events like China’s mining ban or Elon Musk’s criticism of power consumption, which have put the BTC course in a bad position this year. Leave some room for maneuver. With the statement that the model would not be valid if Bitcoin did not rise to 100,000 US dollars in December, PlanB itself denied the validity of the price forecast.
PlanB: the model is intact
Really. Because in December PlanB was rowing back. A cheep According to the model it is still intact. “Fundamentally, at $ 51,000, BTC is still within one standard deviation of the S2F model (around $ 50,000-200,000). If BTC remains within the 1sd band for the next 2.5 years, then the S2F model is still valid and even useful to me. ” It remains to be seen how useful a model that remains intact is within a $ 150,000 price range.