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Bitcoin’s stock-to-flow deflection at all-time low: creator thinks it’s still valid

bitcoins-stock-to-flow-deflection-at-all-time-low-model-creator-believes-it-is-still-valid
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Bitcoin’s stock-to-flow deflection at all-time low: creator thinks it’s still valid

Bitcoin’s current price is at its as far away as it has ever been compared to the stock-to-flow (S2F) model’s value estimation.

Data provided by blockchain analysis service Glassnode shows that bitcoin is currently worth only 15% of its S2F estimated current value of about $109,000. As of press time, bitcoin is trading at $16,700 after seeing its price increase by 0.08% over the last 24 hours.

Bitcoin's stock-to-flow deflection at all-time low: creator thinks it's still valid - 1
Bitcoin’s stock-to-flow deflection. Seven-day moving average chart. | Courtesy of Glassnode

While this is as far as bitcoin’s price has ever ventured under the price estimated by the stock-to-flow model, it has exceeded that value by a much more significant degree in the past. Back in 2011 — when bitcoin was trading at $18.72 — Bitcoin’s S2F deflection was 30.76, meaning that it was trading at nearly 31 times the estimated price.

The S2F model is a method of valuing commodities based on the relationship between their current supply and the rate at which more is produced.

Those who believe in its application, in this case, suggest that bitcoin’s value is directly proportional to its scarcity, with a higher stock-to-flow ratio indicating a higher value. The model gained notoriety because it has been able to successfully predict the long-term price of bitcoin in the past with a notable degree of accuracy.

The model’s predictions are shaped by the idea that as the stock of bitcoin increases and the flow of new bitcoin decreases — due to the halving of the issuance rate, which occurs roughly every four years — the value of bitcoin should increase. This is because the decreased supply of new bitcoin combined with increasing demand should lead to higher prices.

Bitcoin's stock-to-flow deflection at all-time low: creator thinks it's still valid - 2
Bitcoin’s stock-to-flow model. | Courtesy of Buy Bitcoin Worldwide

As can be observed on the chart, over the last few years bitcoin has ventured further below the expected value than ever before — but not as far as it did on the upwards side in the past. The model’s creator PlanB recently suggested that bitcoin could soon realign itself with the S2F model and will end up being worth “somewhere between $100,000 and a $1 million.”