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- Bitcoin price stock-to-flow model creator Plan B has observed that Bitcoin (BTC) has reached its lowest level against gold (XAU) in four years.
- Succeeding a sell-off as a cause of coronavirus in March, the gold phased a grand V-shaped recovery.
- According to the Stock-to-flow model, the annual inflation rate of Bitcoin is predicted to fall below that of gold with 2% and 1.66% respectively
Plan B, Stock-to-flow model creator observed that Bitcoin (BTC) has reached its lowest level against gold (XAU) after the year 2017.
#bitcoin priced in gold (BTCXAU) … at lowest level in 4 years. Stock-to-Flow suggest BCT📈 or gold📉 pic.twitter.com/HEewN6ZJFW
— PlanB (@100trillionUSD) April 18, 2020
The ‘Stock-to-flow’ predicts how many years are needed to pursue the current stock, at the given current production rate. In other words, S2F ratios help evaluate the current amount of a commodity against the new production flow. Also, a higher ratio signifies that there is an increased scarcity of the commodity.
However, this does not come off as a piece of good news for the yellow metal as it is probable to go down if Bitcoin doesn’t make out a post-halving price rally.
Gold Recovers with a Strong Performance
In March there existed a sell-off as a cause of coronavirus, after which the gold phased a grand V-shaped recovery. The traditional safe-haven asset scaled to a near $1,700 on April 14 which was its seven-year high. Also, its 20% rally this year certainly downgrades Bitcoin.
This positive performance of gold strengthened Peter Schiff who is an economist and a financial dealer. He took to Twitter on April 12 that Bitcoin, gold’s digital alternative, will crash back to Earth. Whereas, gold will moon. He added that over the past few years Bitcoin holders took pride in Bitcoin gaining much more than gold. However, soon the roles of the two will reverse, Peter further stated.
Bitcoin (BTC) prone to become more scarce than gold
According to the Stock-to-flow model, the annual inflation rate of Bitcoin is predicted to fall below that of gold with 2% and 1.66% respectively. In other words, it signifies that Bitcoin (BTC) is on the verge of becoming more scarce than gold.
Plan B also stated a prediction that the Bitcoin price is likely to increase ten-fold by 2021-end.
That being the fact, the Stock-to-flow (S2F) model faces constant criticism since it takes only the supply part into account. This results in eliminating demand out of the equation.
