Bitcoin’s Stock-to-Flow Model Remains Unchanged, Despite Price Collapse

Has Bitcoin broken its upward trend for good and is now in freefall? Despite the panic, the recent drop does not change much if we look at the most reliable prediction models. The stock-to-flow model (S2F) for predicting Bitcoin’s price movements in the long-term has been gaining credibility ever since it was published in March 2019. Essentially, the model quantifies scarcity and places it on a price trajectory. The supply growth rate is flow/stock, according to how it was explained when first unveiled in mid-2019.  Given Bitcoin’s inherent scarcity, the S2F model predicts that there is, indeed, some method to the market’s madness. Moreover, it incorporates the cryptocurrency’s market biggest issue which is overestimating risk. Right now, we are seeing this happen in real-time with the oil-price war. The S2F model for mapping Bitcoin shows we are still on track in the long-term. PlanB (@100trillionUSD), who coined the S2F model for Bitcoin, demonstrates the trajectory below.

#bitcoin S2F chart adjusted for today's "crash" … nothing really happened, btc still spot on S2F track pic.twitter.com/7bIaZpWgLB

— PlanB (@100trillionUSD) March 8, 2020

If this trajectory holds up, we will still see significant gains after the halving event.  Although the S2F model for Bitcoin is still holding up, this doesn’t mean that we are completely safe. In fact, the excess of unexpected variables is bringing the entire economy on the brink of something far more serious — and thinking Bitcoin won’t be severely impacted is, arguably, misguided. Bitcoin is not the end-all during times of crisis and will likely suffer further losses. However, its inherent scarcity means there is a strong case to be made that Bitcoin will demonstrate resilience and staying power in the long-term. In other words, Bitcoin is now facing one of the most important tests of its short life. Other models have been tried to trace Bitcoin’s future price movements, but the S2P model remains the most accurate thus far. However, with too many black swan events now in the picture, we should still be cautious. Many traders are now sitting on the sidelines until the smoke clears.