Stock-to-flow (S2F) model

Stock-to-flow is a ratio that compares the existing supply of an asset (the stock) with new supply produced each year (the flow). Gold has a high stock-to-flow ratio because annual mining adds only a small percentage to all the gold already above ground. Bitcoin's ratio jumps with each halving because new issuance is cut in half.

In 2019 a pseudonymous analyst known as PlanB popularised a stock-to-flow model that used this ratio to predict bitcoin's price. It became famous during the 2020-21 bull run, but its forecasts, such as a price of around $100,000 by the end of 2021, did not materialise, and many analysts criticise it for ignoring demand entirely.

The underlying idea, that bitcoin's supply becomes ever scarcer on a known schedule, is sound and easy to verify. Using that scarcity alone to forecast exact prices is not. Treat any single-factor price model with caution.