What Is the Bitcoin Stock-to-Flow Model?

BeginnerJan 18, 2023
The Bitcoin Stock-To-Flow model is a prediction model that studies the existing supply of bitcoin and the rate at which new units of bitcoin are produced.
What Is the Bitcoin Stock-to-Flow Model?

In the investment world, having reliable ways to try and predict an asset’s future value is extremely important to make informed decisions about where an investor should place his wealth.

Even though cryptocurrency is famous for its volatility, there are ways to try and pinpoint some of its movements: the Bitcoin Stock-to-Flow Model (S2F) seems to be a reliable one as far as scarcity is concerned, and presented some accuracy in predicting BTC prices in the past.

What Is the Bitcoin Stock-To-Flow Model?

The Bitcoin Stock-to-Flow Model (S2F) is a ratio that helps determine the amount of years it will take to achieve the current amount of this cryptocurrency stock in the future, helping to estimate its value.

The Stock-to-Flow Model is the ratio of the quantity of a resource currently in stock, divided by its annual production. The higher the ratio, the higher the price will tend to be, which in turn, suggests there is more scarcity. Since BTC’s supply and mining mechanisms are really easy to predict, given that the main variables were already coded when it was first built, it was proven to be an accurate model multiple times.

The model can usually be applied to predict the value of natural resources, and seems to work for Bitcoin due to its own scarcity. It is widely believed that most of the value of this asset (besides the speculative one) relies on the fact that it has a programmed scarcity - meaning that the maximum amount of coin able to be in circulation is no more than 25 million BTC.

Stock-to-Flow Ratio of Gold

For instance, when the Stock-to-Flow model is applied to gold: it is estimated that approximately 205,238 tons have been mined, as of 2022 - that is called the stock of this asset. Yearly, the quantity mined lies between 3,000 to 3,300 tons, estimates suggest - this is the flow of new quantities of this resource being inputted.

Therefore, dividing 205,235 - the stock - by 3,300, the flow, we are able to reach the number 62, meaning that it would take approximately 62 years to mine the amount of gold currently in stock, considering the amount that is possible to be mined each year.

Suppose a new technology was invented that helped mine five times the amount of gold available, new sources were discovered in the same year, or even that someone managed to create a way to make gold from scratch. Then, the scarcity of this metal would be lower, and consequently its market prices would fall. Realistically, though, gold is a finite resource, making the likelihood of this scenario very small.

Is Bitcoin Stock-to-Flow Accurate for Price Predictions?

Those who defend the use of this model for Bitcoin, treat it like a store of wealth that relies heavily on its scarcity, much like silver and gold have been, historically. There are a few key facts that support this belief:

  • Bitcoin is costly and difficult to mint: there is a high computational power and electricity cost that goes into mining a new coin;
  • It has a predictable issuance rate, due to its protocol levels - meaning that it can not behave erratically;
  • There is a system in place to ensure scarcity, known as Bitcoin Halvings: once every 210,000 blocks are issued, the amount of new coins capable of entering the system is halved.

The use of this ratio in Bitcoin was popularized by an alleged Dutch former institutional investor known as “Plan B” In 2019, he published an article online about how to model bitcoin value with scarcity, becoming a relevant name in cryptocurrency, and according to the Cointelegraph, one of the top 100 people in crypto. His study has been the leading go-to source for users that rely on Stock-to-Flow for valuation.

What this serves to prove is that the model seems to be reliable in terms of measuring Bitcoin’s scarcity. However there is an underlying belief that scarcity drives value that still raises strong questions, especially since it seems to ignore other important limitations.

If we analyze the BTC Stock-to-Flow chart, there is an interesting pattern since 2010. Bitcoin prices (in rainbow colors) slightly deviate from the Stock-to-Flow model (in white) and are accurately close to the predictions in most cases. Also, there is a pattern that after every halving (in blue), there is a spike in price, followed by a correction and a long period of lateralization in the market.

Limitations of the Stock-to-Flow Model

While the model shows a good framework for scarcity, the assumption that it is enough to comprehend its value seems to lack a nuanced view of different factors that directly influence Bitcoin prices as well, such as:


Bitcoin is widely known for being a volatile asset. There are predictions that this should lessen and even out in time, but this factor is still not contemplated by the model, and causes a strong impact on the cryptocurrency.


Metals like silver and gold have other uses rather than simply being stores of wealth. They can be marketed as jewelry, components for technology as well as raw materials for different industries. Their value is also reliant on their usability, which is not the case for cryptocurrencies.

Black Swan Events

Market events that are unexpected and cause an extreme and unpredictable movement in asset prices, while rare, are not impossible and directly affect prices and value.

One of the main critics of the Stock-to-Flow is the co-founder of Ethereum and Bitcoin Magazine, Vitalik Buterin. With a deviation from the estimated price rises in June, 2022, Buterin criticized the model, claiming that financial models that give a false sense of certainty and predestination are harmful. In the past, he also held the opinion that the model was unfalsifiable, meaning that at any price range it could prove the model to be correct, without a realistic degree of error.


In fact, there are many important factors to consider when trying to value an asset both for personal use, or for investment goals. A model is only effective when it is held by premises that withstand the test of time and do not rely on false premises or promise to predict the future.

With that in mind, an investor needs to understand what the Stock-to-Flow can and cannot predict, and what assumptions about it hold weight. The model proves to be reliable in terms of telling Bitcoin’s scarcity, but does not show a direct proven correlation between that and value predictability - even though in the past it was correct multiple times.

Author: Gabriel
Translator: binyu
Reviewer(s): Edward
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