Stock-to-Flow Model Predicts Post-Halving Bitcoin Market Cap at $1 Trillion (“Stable & Accurate Since 2012”)

  • Deflationary asset Bitcoin stock to flow ratio to move closer to gold with the next halving
  • The higher the ratio, the more desirable and valuable the asset
  • Bitcoin analyst PlanB shares about Bitcoin halving effect on the price by following a Stock-to-Flow model that he says has been stable and accurate since 2012.

The most prominent reason behind Bitcoin’s huge price appreciation is it being a deflationary asset. It is deflationary in the sense that the supply of the leading cryptocurrency is fixed at 21 million and cannot exceed this figure ever.

In our current economic environment, the supply of fiat currency can be increased at just the press of a button that brings forth the problem of inflation and in some cases like Venezuela, hyperinflation.

In contrast to the fiat system, a deflationary asset like Bitcoin absorb the excess liquidity resulting in an increase in its price.

This is where stock to flow ratio comes in the picture which is used for assets that are scarce like gold. This ratio is the number of assets held in reserve divide by the amount produced every year. The higher the ratio of an asset the more desirable the asset is as a store of value.

When comparing to the yellow metal, that has the highest SF of 62, Bitcoin has a stock to flow ratio of about 25. With the next halvening in 2020, the block reward will drop to 6.25 that will increase this SF even higher and closer to gold at 50 and by the higher the SF ratio, the more desirable an asset rule, we will see BTC price to make new highs.

In March 2019, analyst planB explained about this model and further stated that it

“predicts a bitcoin market value of $1trn after next halving in May 2020, which translates in a bitcoin price of $55,000.”

In the latest update, planB shares the reason for preferring stock to flow model for the world’s top cryptocurrency because of its stable parameter. He further says, the S2F model will hold for 1 or 2 more halvings that will occur in 2020, 2024, and then the last one in 2028.

Bitcoin is the first scarce digital currency like gold and silver that can even be sent over the internet, radio, and satellite that makes it far more valuable. The analyst has previously shared that these precious metals which are totally different but are still in line with the Bitcoin model values for SF further puts confidence in this model.

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