The Stock-to-Flow (S2F) model has been one of the most bullish tools for predicting Bitcoin’s price. Popularized by the pseudonymous analyst Plan B (@100trillionusd), the model treats Bitcoin as a scarce commodity akin to gold, dividing the existing stock by the annual flow (newly minted coins). Plan B’s 2020 report titled “Modeling Bitcoin’s Value with Scarcity” gained viral traction, predicting that after the May 2020 halving, Bitcoin’s market cap could reach $1 trillion, implying a price of $55,000.
How the S2F Model Works
The S2F ratio, commonly used for precious metals, was adapted to Bitcoin using monthly data from December 2009 to February 2019 (111 data points). Plan B corrected for lost coins by disregarding the first million coins (7 months) and used the actual number of blocks mined (which deviates from the theoretical 10-minute schedule early on). “Bitcoin is the first scarce digital object,” he wrote, “scarce like silver and gold, but transmittable over internet, radio, satellite.” The model hinges on halvings, which cut block rewards and reduce flow, thereby increasing scarcity and theoretically boosting price.
Critics: Blind Faith Is Dangerous
Not everyone is convinced. The Seattle-based crypto hedge fund Strix Leviathan published a report on April 1, 2020, titled “Lost in Space – Bitcoin and the Halving,” dismissing S2F as oversimplified. Portfolio manager Nico Cordeiro warned: “Doing so leaves one’s investment subject to the whims and beliefs of the crowd while surrendering returns to the randomness of luck.” The report noted that halving narratives could be false frameworks. Moreover, Bitcoin’s crash to $3,800 on March 12, 2020 (“Black Thursday”) undermined the model’s apparent reliability. Plan B himself acknowledged limitations, tweeting: “It’s better to be approximately right than exactly wrong. S2F is not dead accurate, but an order of magnitude right.”
Supporting Evidence: S2F Does Matter
Despite skepticism, a March 27, 2020 paper titled “Stock-to-Flow Influences on Bitcoin Price” provided statistical support. Using an Autoregressive Distributed Lag (ARDL) model, the authors concluded: “We have been able to reject the hypothesis that stock-to-flow does not have an important non-spurious influence on the US dollar price of Bitcoin.” The bounds test for a level relationship offered robust evidence. Plan B also remained upbeat, noting that BTC had oscillated around the S2F value of $7,000 for 2.5 years before the 2016 halving ($300) and before the 2012 halving ($6). “Excited to see if we are going to add another zero after the halving in May,” he tweeted on April 1, 2020.
The S2F debate encapsulates the tension between quantitative modeling and market sentiment. As the 2020 halving approached, the model’s prediction remained a focal point, with proponents and detractors watching closely.