{"id":303581,"date":"2021-07-20T15:57:00","date_gmt":"2021-07-20T12:57:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/stock-to-flow-model-possibly-invalidated-as-bitcoin-price-loses-30k\/"},"modified":"2021-07-20T15:57:00","modified_gmt":"2021-07-20T12:57:00","slug":"stock-to-flow-model-possibly-invalidated-as-bitcoin-price-loses-30k","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/stock-to-flow-model-possibly-invalidated-as-bitcoin-price-loses-30k\/","title":{"rendered":"# Stock-to-flow model possibly invalidated as Bitcoin price loses $30K"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a37355de1351\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a37355de1351\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/stock-to-flow-model-possibly-invalidated-as-bitcoin-price-loses-30k\/#Deflection_from_S2F_model_at_an_all-time_high\" >Deflection from S2F model at an all-time high<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/stock-to-flow-model-possibly-invalidated-as-bitcoin-price-loses-30k\/#Demand_and_adoption_dynamics_have_shifted\" >Demand and adoption dynamics have shifted<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/buradabiliyorum.com\/en\/stock-to-flow-model-possibly-invalidated-as-bitcoin-price-loses-30k\/#The_rate_of_adoption_model_might_be_more_accurate\" >The rate of adoption model might be more accurate<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Stock-to-flow model possibly invalidated as Bitcoin price loses $30K <\/strong>&#8221;<\/p>\n<div class=\"post-content\" data-v-128018ef>As the price of Bitcoin (BTC) continues to struggle around the $30,000 mark, the widely accepted stock-to-flow (S2F) model to price Bitcoin, coined by <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">Twitter<\/a> user and unnamed Dutch investor Plan B, is now the farthest from its estimates.\u00a0<\/p>\n<p>The model was popularized by the Twitter pseudonym more than two years ago in March 2019 and amid a minor bull through Q1 2019. It\u2019s considered to be one of the leading quantitative valuations for the first-ever scarce digital currency to exist. The model presumes that scarcity of certain assets or commodities drives its price.<\/p>\n<p>The S2F model is an attempt to price Bitcoin in a way similar to scarce commodities, such as gold, silver, etc. The essence of it is that assets like Bitcoin, gold and silver have only limited supply injections in a certain period of time when compared with commodities like oil, copper and steel, where the supply flow is higher and considered to be theoretically limitless.\u00a0<\/p>\n<p>Since Bitcoin has a maximum supply limited to 21 million tokens and considering the time- and energy-intensive mining process, there is only a certain number of new Bitcoin that can come into circulation in a certain timeframe. The premium cryptocurrency had fit right into this model, until now. Johnny Lyu, CEO of KuCoin Global \u2014 a cryptocurrency exchange \u2014 told Cointelegraph:<\/p>\n<blockquote><p>\u201cThe model creator tried to predict the continuously surging Bitcoin price based on its\u00a0scarce nature similar to gold in that it also has a high stock-to-flow ratio. Therefore, the hypothesis is: As Bitcoin\u2019s stock-to-flow rises, so will its price.\u201d<\/p><\/blockquote>\n<p>He went on to say that models like these are usually built on historical data and that while some periodic trends can help identify the <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a> direction of the market, specific trends can often be difficult to track in advance.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Deflection_from_S2F_model_at_an_all-time_high\"><\/span>Deflection from S2F model at an all-time high<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>According to the S2F model, BTC\u2019s price is supposed to be at $88,531 on July 20, which is nearly three times the current price. In fact, earlier this year, PlanB suggested that Bitcoin could hit $450,000 before the end of this year in the best-case scenario, and $135,000 in the \u201cworst-case scenario.\u201c Furthermore, the model predicts that Bitcoin is expected to have hit its much-awaited $1 million mark in July 2025.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.cointelegraph.com\/uploads\/2021-07\/85282a09-d75d-42e8-8d21-09320f6c6257.png\"><\/figure>\n<p>However, in a PlanB Twitter <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/100trillionUSD\/status\/1407273891957989377?s=20\">poll<\/a> on June 21, 41% of respondents thought that Bitcoin would remain under $100,000 this year.<\/p>\n<p>This is compared to the 16% that believed the same back in March this year when Bitcoin was exchanging hands at $55,000. PlanB went on to say that Bitcoin prices deviating from the S2F model make even him feel \u201ca bit uneasy.\u201d<\/p>\n<p>The model, as the name would suggest, uses the stock-to-flow ratio to value Bitcoin. This ratio is defined by the current number of Bitcoin in circulation at a given time and the incoming flow of newly mined Bitcoin. As evident in the chart describing the model, historically, Bitcoin has traced the price estimates in a fairly accurate fashion at most times.<\/p>\n<p>As <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/twitter.com\/mskvsk\/status\/1413840827160346629\">pointed<\/a> out by\u00a0Lex Moskovski, chief investment officer of Moskovski Capital, the negative S2F deflection \u2014 the ratio between the market price of Bitcoin and the S2F ratio \u2014 is now the highest it has ever been in the history of the token. He went on to say that for believers in the S2F model, this is a great time to buy Bitcoin, as this price drop could be perceived as an unexpected dip.<\/p>\n<p>Lennix Lai, director of financial markets at cryptocurrency exchange OKEx, spoke with Cointelegraph on the limitations of the S2F model, saying:\u00a0<\/p>\n<blockquote><p>\u201cDespite its limited predictions, the S2F model only had limited power over Bitcoin price prediction because it assumes the production of Bitcoin will be limited. While its simplicity makes the concept easier to understand, PlanB debuted the Bitcoin S2F model back in 2019. Demand back in the time is a different story to now, in which demand has a direct influence on its intrinsic value.\u201d<\/p><\/blockquote>\n<h2><span class=\"ez-toc-section\" id=\"Demand_and_adoption_dynamics_have_shifted\"><\/span>Demand and adoption dynamics have shifted<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>One of the major changes in the past year for Bitcoin and the cryptocurrency markets as a whole is the high rates of institutional and retail adoption that have drastically increased since March 2019. Another important factor in this demand and adoption dynamic is the COVID-19 pandemic that has plagued the world for more than 19 months now. Lai elaborated more on this, saying:<\/p>\n<blockquote><p>\u201cThe pandemic has probably also accelerated adoption, as the USD supply has inflated massively over the last year. Investors are seeking alternative assets to place their money in as a hedge against inevitable inflation. We also see daily analyses from well-respected firms and institutions predicting that Bitcoin is undervalued, the Musk effect is an ambush to the market.\u201d<\/p><\/blockquote>\n<p>The Musk effect, combined with various other factors, such as the mainstream popularity of nonfungible tokens (NFT), has played a large role in raising awareness about cryptocurrencies and blockchain <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/technology\/\" data-internallinksmanager029f6b8e52c=\"4\" title=\"Technology\" target=\"_blank\" rel=\"noopener\">technology<\/a> in general.\u00a0<\/p>\n<p>Lyu touched upon this changing scenario in the cryptocurrency market as well, saying, \u201cThe emerging projects and altcoins on the market with diversified <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>lication scenarios will distract investor attention and diversify their existing investment portfolios, thus continuously fluctuating the Bitcoin market.\u201d This change is evident in the fact that, since the beginning of this year, Bitcoin\u2019s dominance as the premier cryptocurrency has fallen from over 60% to its current 46.3%, signifying a growing altcoin sector.<\/p>\n<p>In a recent example of the shift in demand and adoption dynamic since the inception of the S2F model, the Grayscale Bitcoin Trust Fund (GBTC) recently underwent several share unlockings across July, with the biggest on July 18. This expiry further increased the continual downward pressure on Bitcoin, causing it to drop further to trading around $30,500 on July 19, dropping from nearly $32,200 on July 18 before the expiry. In the past \u2014 when the S2F model initially became prevalent \u2014 there wasn&#8217;t institutional demand that could heavily impact the market in a short amount of time.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_rate_of_adoption_model_might_be_more_accurate\"><\/span>The rate of adoption model might be more accurate<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>While the S2F model is one of the most widely known quantitative models that predicts Bitcoin\u2019s price in the short term (less than five years), there are several other models that are often used to gauge its price potential. Daniele Bernardi, founder of the PHI Token project and CEO of Diaman Partners Ltd. \u2014 a fintech asset management company \u2014 explored some of these models in a recent <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/papers.ssrn.com\/sol3\/papers.cfm?abstract_id=3879700\">paper<\/a>. Bernardi evaluated the inadequacies of the S2F model, stating to Cointelegraph:<\/p>\n<blockquote><p>\u201cIt is not enough to consider the scarcity to predict the fair value price of an asset, because of course, it has to be supported by the demand. My mom (can) draw some art, but if no one wants to purchase them, the value is zero despite the scarcity.\u201d<\/p><\/blockquote>\n<p>Instead, Bernardi prefers the rate of adoption model, which he explores in his paper. He stated that, according to this model, the \u201cfair price\u201d of Bitcoin can be around $60,000, but not more than that. This estimate is based on the \u201cactual users of Bitcoin and the wallets created.\u201d\u00a0<\/p>\n<p>He went on to explain the probability of PlanB\u2019s S2F model actually coming into fruition this year: \u201cOf course, anything can happen, but from my point of view, there is less than 20% of probability, based on Monte-Carlo simulations, that the Bitcoin price will reach a value greater than $100,000 in 2021.\u201d<\/p>\n<p><em><strong>Related: <\/strong><strong>Forecasting Bitcoin price using quantitative models, Part 3<\/strong><\/em><\/p>\n<p>That said, it is important to remember that Bitcoin was exchanging hands at $18,000 for a few days in the March 2017 bull run and went straight to trading at $64,000 earlier in February this year.\u00a0<\/p>\n<p>There are not many assets in financial markets that have witnessed gains at these levels within such a short timespan. Bernardi explained the impact of this growth:<\/p>\n<blockquote><p>\u201cWe have to consider that only after six months that the Bitcoin price hit a value greater than $30,000, we are tempted to consider the Bitcoin undervalued, but it is not; it is just in the fair value average price, based on our \u2018rate of adoption\u2019 model.\u201d<\/p><\/blockquote>\n<p>Fair value or not, Bitcoin seems to be in a period of turmoil, more often than not facing downward pressure on the token since the flash crash on \u201cBlack Wednesday\u201d earlier in May. However, positive institutional <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">news<\/a> keeps flooding in. Most recently, Grayscale CEO Michael Sonnenshein said that Grayscale is \u201c100% committed\u201d to turn GBTC into a Bitcoin exchange-traded fund.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"><\/template><\/div>\n<p><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more News articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/stock-to-flow-model-possibly-invalidated-as-bitcoin-price-loses-30k\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Stock-to-flow model possibly invalidated as Bitcoin price loses $30K &#8221; As the price of Bitcoin (BTC) continues to struggle around the $30,000 mark, the widely accepted stock-to-flow (S2F) model to price Bitcoin, coined by Twitter user and unnamed Dutch investor Plan B, is now the farthest from its estimates.\u00a0 The model was popularized by&#8230;<\/p>\n","protected":false},"author":1,"featured_media":303582,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/images.cointelegraph.com\/images\/1200_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDcvOTljMGIzMjgtNGU1YS00OTc2LWJlZTMtMjI0MGFlMWQ5MmIxLmpwZw==.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74937,74863,74355,117,73711],"class_list":["post-303581","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-price","tag-cryptocurrencies","tag-adoption","tag-business","tag-investments"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/303581","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=303581"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/303581\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/303582"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=303581"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=303581"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=303581"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}