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- As the price of Bitcoin remains stuck around $30,000, the widely recognized stock-to-flow (S2F) model, coined by the Twitter user and unknown Dutch investor Plan B, is currently the furthest from its projections
- According to the S2F model, the price of BTC on July 20 should be $88,531, over three times the present price
- The high rates of institutional and retail adoption that have significantly grown since March 2019 have been one of the biggest shifts in the last year for Bitcoin and the cryptocurrency markets as a whole
As the price of BTC remains stuck around $30,000, the widely recognized stock-to-flow (S2F) model, coined by the Twitter user and unknown Dutch investor Plan B, is currently the furthest from its projections. The S2F model attempts to price Bitcoin in a manner comparable to that of rare commodities like gold, silver, and so on.
The gist of it is that assets like Bitcoin, gold, and silver have only finite supply injections in a given period of time, as compared to commodities like oil, copper, and steel, where supply flows are higher and theoretically endless. Because Bitcoin has a maximum supply limit of 21 million tokens, and due to the time-and energy-intensive mining process, only a limited quantity of new Bitcoin may enter the market in a given timeframe. Until recently, premium cryptocurrencies have fit nicely into this paradigm.
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According to the S2F model, the price of BTC on July 20 should be $88,531, over three times the present price. In fact, PlanB predicted earlier this year that Bitcoin might reach $450,000 by the end of the year in the best-case scenario, and $135,000 in the worst-case scenario.
Furthermore, the model forecasts that BTC will reach the much-anticipated $1 million mark in July 2025. However, according to a PlanB Twitter survey conducted on June 21, 41% of respondents believe Bitcoin would remain below $100,000 this year. This compares to the 16% who felt the same thing in March when Bitcoin was trading at $55,000.
PlanB went on to explain that Bitcoin prices that deviate from the S2F model made him a little nervous. The approach, as the name implies, values Bitcoin using the stock-to-flow ratio. This ratio is determined by the existing number of Bitcoin in circulation at any one time and the inflow of freshly produced Bitcoin. As seen in the model’s description graphic, Bitcoin has historically traced price projections quite accurately most of the time.
The high rates of institutional and retail adoption that have significantly grown since March 2019 have been one of the biggest shifts in the last year for Bitcoin and the cryptocurrency markets as a whole. Another crucial aspect in this demand and adoption dynamic is the COVID-19 pandemic, which has been wreaking havoc on the planet for over 19 months.
The Musk effect, in conjunction with other variables like the mainstream appeal of nonfungible tokens, has played a significant influence in increasing public awareness of cryptocurrencies and blockchain technology in general. Whether it is a fair value or not, Bitcoin appears to be in a time of turbulence as the token has been frequently surfing downward pressure since the flash crash on Black Wednesday in May. Positive institutional news, on the other hand, continues to pour in.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
