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Bitcoin Stock-to-Flow Model – The Cryptocurrency Market Tool or Manipulation

Bitcoin Stock-to-Flow Model – Everything You Should Know

The majority of professional traders, as well as analysts who are trying to analyze the crypto market, comprehend the following fact – it is almost impossible to predict the price given that the volatility is high (however, not as high as some people might be). Endless attempts to use standard market tools brought almost zero results, as many believe that the crypto market is highly driven by people, namely investors, traders, and of course, crypto hodlers. 

We are not going to dive into the analysis since our main focus of this article is to review the Stock-to-Flow model. 

What is Bitcoin stock to flow

First of all, this is not a model that must predict the BTC price. We must accept the truth – the price will always be a mystery for our and upcoming generations unless someone will come up with an ultimate idea or tool on how to tame the wild Bitcoin. So what is that?

https://www.youtube.com/watch?v=nDXTjAKSEu0

The model is comparing Bitcoin to natural, economic resources, including silver, platinum, or gold. The mentioned primary commodities are well-known assets for many regular users, investors, or traders. The commodity market does not have ‘insane’ volatility since all market participants know and understand how it is regulated. 

Moreover, when it comes to investing in commodities, all investors know that they can hold value over long periods thanks to the scarcity of such resources. Here, a deficiency is a problem for quite a long time. Mainly, it is complicated to boost the supply of these resources. For example, gold mining is considered to be an expensive process, and not all companies can afford to undertake it. That is why, in terms of scarcity, most experts believe that it is possible to create a single model for Bitcoin since the supply of coins is limited. Besides, Bitcoin is the number one digital difficult-to-obtain object in the whole world. At least, it is by far.

The creator of this model is a guy under the nickname ‘PlanB.’ Many specialists and experts have already driven their attention to his project by reacting in both negative and positive ways. The main thing to review in this model is a number that indicates what number of years is needed to attain the current stock. It is crucial to notice that the proposed model refers to a process known as halving. As many of you may know, Bitcoin’s network has a unique halving schedule, where the main target to decrease the reward for miners, as well as increase the complexity of the whole process. The ultimate goal is to reach a zero point. Currently, digital miners get a 12.5 BTC reward for the completed block. In May 2020, the next halving will decrease the reward to 6 BTC.

The Criticism of the Bitcoin Stock-to-Flow Model

And here, where the things go wild. Given that any community cannot resist news, the crypto community is not an exception. For example, Joe Weisenthal, who is a well-known co-host of ‘What’d You Miss?’ on Bloomberg TV, brought on a deluge of criticism against the model. 

His main point is that it is a stupid and ridiculous way to predict the Bitcoin price based on its scarcity. Moreover, the comparison of Bitcoin with traditional commodities is also absurd. Besides, the member of Bloomberg TV strongly believes that the BTC supply cannot be considered as a vital factor when it comes to the BTC price.

The twitter thread created by him received many responses, retweets, and likes, as the community continues to research the S2F model. The mentioned creator of this model, PlanB, also reacted to Weisenthal’s tweet. 

Needless to say that the crypto community got divided once again after the model discussion went through all Twitter community.

Nonetheless, this was just an opinion of a popular media-person. You must always remember that advice and thoughts are different, and in many cases, it is hard to face the defeat even if you are wrong. Our primary purpose was to show what is the Bitcoin Stock-to-Flow model.