Bitcoin stock to flow model and why it is Doomed to fail [Longterm]

Bitcoin stock to flow model and why it is Doomed to fail [Longterm]

By Harshith6612 | Crypto Nerds | 22 Sep 2021


If you have been in crypto for a while I'm sure you have heard about the stock-to-flow[S2F] but today I'm not here to support the model but to Explain why it's not realistic but before that let's understand what it is [if you know it already skip to para 3]

So firstly let's understand what S2F is. It is a model usually use to model commodities especially gold. It is the amount of bitcoin that is already mined by the amount of bitcoin that is mined each year.

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 So now that you know what bitcoin stock to flow is let's jump straight into why it's doomed to fail.

  • It only consists of half of the equation it completely ignores the other side of the equation Demand and goes all in on Supply. This means it's too generous especially in the 2030s and the '40s and that Brings us straight into the next point.
  • According to the model, the price of bitcoin will reach 5 million by 2040 which gives bitcoin a market cap of a mind-boggling 100 trillion n which is almost impossible to put that into perspective the total GDP of the world in 2019 was 79 trillion. Also at that valuation bitcoin would be 6 times more valuable than gold that's excluding all other crypto's available.
  •  It is impossible at least adjusted for inflation for Bitcoin to hit that value. So here is the good news It is possible to hit that valuation but not at today's value. Theoretically, bitcoin could go as high as you think but you need to adjust it for inflation. Bitcoin could go to 100 million today if the world were to go into Hyperinflation but we need to look at things in terms of purchasing power.

 So to conclude the article where do I think Bitcoin is headed I think Bitcoin has a maximum hard cap of around 1 million as That matches up closely to the market cap of gold. But that's just my opinion you can share your opinion Below I would be happy to hear and reply to it.

Also, suggest me some topics to write as searching for good topics as that is a hard thing for me. Once again Thanks for reading. Also, you can follow me as I plan to write Weekly from now on.

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Harshith6612
Harshith6612

A 16-Year-old crypto enthusiast from india


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