Understanding the Stock to Flow Cross Asset Model as it pertains to Bitcoin
One of the most accurate models with regards to Bitcoin is turning out to be the Stock to Flow Model Cross Asset model – as introduced by PlanB.
While we still embrace a “No one knows what Bitcoin is going to do” mentality,we take note when we see information being circulated by PlanB.
The S2FX Model is being proven out in real time as the bitcoin network marches through the growing pains.
Price goes up. Price goes down. Hashrate goes up. Hashrate goes down. Transactions and transaction fees go up. Transactions and transaction fees go down. Transactions go up and fees go down. Wallet addresses go up. Wallet addresses are held by same User. Block reward is 12.5 btc. Block reward is 6.25 btc. Macro events good. Macro events bad. On it goes….
Below is a summary of the Model – although we suggest you follow the link for a better understanding.
The updated price model, dubbed the Bitcoin S2F Cross Asset Model (S2FX), takes into account not only bitcoin, but two other assets with similar stock-to-flow properties in the sense that they are all mined and held by investors, namely gold and silver.
By dividing bitcoin’s history into separate price clusters based on the dominant “narrative” at the time for what bitcoin really is, the S2F creator came up with the conclusion that bitcoin over time has been widely seen as:
- “Proof of concept”
- “Financial asset”
Calculating market value and stock-to-flow for bitcoin during these periods, while also doing the same for gold and silver, gave a model of the four bitcoin clusters and gold and silver, which together formed a near-perfect line on the chart.