These other assets’ stock and flow can be affected by too many unknown variables for the metric to be all that useful for forecasting. We use the S2F model to predict Bitcoin’s future price points because we have more reliable data about its current stock and flow than we do for many other assets, like commodities and precious metals.
Why Do We Use the Stock to Flow Model to Forecast Bitcoin’s Price Moves? Comparatively, goods with low S2F rations, like clothes, food, and other consumable items, generally lose value over time. And broadly, assets with higher S2F ratios should, in theory, grow in value over time. So over time, as fewer BTC enter the market relative to the total supply, Bitcoin’s S2F ratio will rise. For reference, gold’s estimated S2F ratio is around 62 right now. Since Satoshi created Bitcoin back in 2008, the reward has halved three times from 50 BTC to 6.25 BTC per block, but isn’t scheduled to halve again until 2024.Īnd finally, to calculate the S2F ratio, we divide our circulating supply, 19,060,593, by our annual flow, 328,500, which gives us a ratio of 58.02. Keep in mind that Bitcoin’s flow isn’t constant it halves after every 210,000 blocks are mined, or about once every four years.
You then multiply the 900 BTC by the 365 days in a year, giving you an annual flow of 328,500 BTC. To calculate Bitcoin’s annual flow, you multiply the number of Bitcoin blocks mined each day, which is currently 144, with the block reward – 6.25 BTC – which gives you 900 new BTC entering the supply each day. This shows how many years, at the current production rate, are required to reach the asset’s current stock.īitcoin’s circulating supply is easy to find just check CoinMarketCap’s Bitcoin page here. To calculate the S2F ratio of any asset, you simply divide the total supply by the annual flow.
#BITCOIN STOCK TO FLOW HOW TO#
How to Calculate Stock to Flow (S2F) Ratio? PlanB argued that because Bitcoin’s circulating supply and flow are known and that creating fake Bitcoin is difficult (if not impossible), we could use an S2F model to accurately forecast Bitcoin’s price movements. The higher the S2F ratio, the scarcer and more valuable the asset is.īitcoin’s S2F model was created by PlanB, an influential analyst and investor in the crypto space. The fundamental logic underpinning S2F models is that scarcity influences an asset’s value more than any other factor.Īn S2F model calculates an asset’s scarcity by comparing its circulating supply, which is called the stock, with its annual incoming supply, also called the flow. Subscribe now to get daily news and market updates right to your inbox, along with our millions of other subscribers (that’s right, millions love us!) - what are you waiting for? What Is The Stock to Flow Model?
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