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Is the Bitcoin stock-to-flow model at its end?



For a long time, the stock-to-flow model was considered incredibly correct in predicting the Bitcoin rate. But in the last 2 months the predictions of the author Plan B deviated extremely strongly from the actual Bitcoin price. Is stock-to-flow still meaningful?

Bitcoin stock-to-flow model - extremely accurate for a long time 

In 2021, a forecasting model was considered the holy grail of Bitcoin forecasting. The stock-to-flow model from Twitter user plan B creates its forecasts from the scarcity of an asset-based on the amount in circulation (stock) already achieved in relation to the amount in circulation (flow).

The model was originally used for commodities such as gold and silver and adapted to Bitcoin by Plan B. In the months leading up to November, the model was extremely precise. Plan B published the first contributions about the model at the beginning of 2019. It was only with the major correction in November and December that the difficulties with the forecasts of Bitcoin Stock-to-Flow arose.

Plan B: Floor model has failed, Bitcoin stock-to-flow is still intact

According to the author, Plan B, the model has not failed due to the incorrect prognoses in recent months. His predictions were $ 98,000 for November and $ 135,000 for December. However, these were forecasts of his floor model, which was partly based on stock-to-flow. 

The Bitcoin stock-to-flow model, on the other hand, is much more flexible. It gives an average price during a Bitcoin cycle. Around this average price, there is a standard deviation within which the Bitcoin price has historically moved again and again. The price is currently at the lower end of this standard deviation.

The model can hardly predict unexpected events

The Bitcoin stock-to-flow model is obviously flawed as it obviously cannot predict sudden events like the mining ban in China. Ultimately, investors' interest in buying determines the price of the Bitcoin asset. But from an economic point of view, the model makes perfect sense. The track record is also impressive.

Plan B itself has since dropped its floor model, but still believes in Bitcoin stock-to-flow. However, the Bitcoin price has to rise sharply in the first quarter of 2022 for the model to make sense again. We'll have to wait a few more weeks before declaring the model invalid.

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