The price of Bitcoin is soaring since the second half of 2020. However, the recent crypto crash shocked many, as its value to $30,000. It has been gradually fluctuating to reach recovery levels, and while writing this article, it currently stands at $36,070.
Bitcoin is a scarce commodity. The world’s largest cryptocurrency bearish look still invites institutional investors, namely Tesla, Microstrategy and others. They intend to convert their cash reserves into BTC, considering that stock-to-flow (S2F) outcomes remain accurate to date, stating the value crossing $100,000 by the end of 2021.
An unknown Dutch institutional investor named PlanB originated the bitcoin S2F model and implemented it in 2019. Its ratios are used to assess the current stock of an available commodity against the flow of new products. There were 17.5 million coins in the stock with 700,000 as of the annual production, giving an S2F ratio of 25.
The model gets strictly applied to Bitcoin only as earlier he tested on ten altcoins which couldn’t produce the desired results. Bitcoin’s S2F is approximately 56 times, and nearly 18.5 million coins are available in the stock. If the flow portion in the S2F model is smaller, then it increases the S2F ratio, implying the BTC is more scarce.
Founder of the Chamber of Digital Commerce, Perianne Boring, said, “Stock to flow says bitcoin should be priced at $100,000 to $288,000 this year. We have 12 years of data on Stock to flow on bitcoin. If you measure with the U.S. dollar, stock to flow is 94% correlated.”
PlanB has been closely monitoring the actual figures of the BTC price. He said its price would range between $100K and 288K before December this year. According to him, the supply shortage is also real.
Plan B’s paper “Modeling Bitcoin Value with Scarcity” believes that many essential metals have prevailed a monetary role in history because of their unprecedented price and low supply rate. Author Saifedean Ammous stated, “For gold, a price spike that causes a doubling of annual production will be insignificant, increasing stockpiles by 3% rather than 1.5%.”
Many Bitcoiners concurred with the author of S2F in his new statement. He tweeted that the 2021 cycle appears to align with the one of 2013. If that repeats, it will pass over the $100,000 mark during the consolidation period in the second half of the year.
Bitcoin’s annual supply has been raised nearly 1.7% in 2021, above gold’s rate of 1.6%. Bitcoin’s new supply does not alter as an outcome of a shift in price. As Bitcoin’s price increases, more resources will move towards mining the currency. However, the Bitcoin network maintains the difficulty of mining new blocks, enabling the rate of new supply is flawless.
It witnessed a bull run maintaining a spike of 1,350 % return and hitting an all-time high of $20,000 in 2017. Going by the trends as per S2F, the bull run could prevail without manipulating its fixed supply in the next six months. It has the potential to outperform traditional assets like gold.
