For years I’ve been intrigued by the stock to flow model. Not only because its high R-squared value, but also because the relation between S2F and price makes sense.
Today I recreated the stock to flow model for fun. The exciting thing was that it lines up almost perfectly with planB’s model and of course the predicted price of roughly 800k by 2030.
However, I noticed that planB’s model stops after 2028. Now in my model at first, I kept the average daily reward at 450 bitcoin until 2030 but then it occurred to me that there must be another halving in 2028.
When when the block reward drops again in 2028, the S2F model would predict a crazy seven million dollars per bitcoin! Of course take this with a grain of salt as we’re taking a model trained on 11 years of data and extrapolate this another eight years. Furthermore, this would put bitcoins market cap at 143 trillion. Which is unlikely as the sp500 has a total market cap of 40 trillion.
Another thing to keep in mind is that the stock to flow model is not stable. If the block reward keeps halving, the S2F will eventually go to infinity and so will the predicted price.
Nevertheless, it is interesting to see that this model puts a price prediction past the 1 million dollar mark.
For those interested in the model: Log(price)= -0,587 + 3,107*log(S2F)
Where the stock to flow variable is the 365 day average of the daily mined bitcoin transformed to a yearly S2F. For example if today the mined amount of BTC equals 900 then the S2F variable = stock/(365*900). The average of this variable is then taken over the past 365 days.
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