Is the S2F Model Still Valid? A Quick Analysis

Is the S2F Model Still Valid? A Quick Analysis

By Lucasgaio | Cryptoscience | 3 Dec 2021

The closing of the monthly candlestick in November on the BTC/USD chart was not the one predicted by the well-known analyst PlanB, author of the Stock to Flow model. In particular, the "worst case scenario" predicted by PlanB reported a minimum price of $98,000 for the end of the month just ended. However, as we know, Bitcoin's price was significantly lower. So is it the failure of the S2F?

What is the S2F model? Read here: Something I believe in: Stock to Flow model

The answer to this question is not immediate. Let's go in order and see the analysis on Bitcoin to understand how it will move in the next period and, above all, if it will get closer to the S2F model.

Technical Analysis

On the daily BTC/USD chart (Tradingview), there is a support zone around $52-53000 and a lower one, at $50,000 (provided by the EMA200). At the top, however, the resistances to break are that of the EMA50 ($58,000), the $60,500 and finally the highs at around $69,000. The retracement of the last period was not significant in percentage terms (around 17%), when compared to that of this spring (almost 50%), and is the weakest in 2021. This gives many traders hope for a rise for the end of the year just as it happened in December 2020. However, with an extra effort on the part of the demand, the scenario of an attack on the upper resistance range can easily be revealed. The RSI indicator (14), on the other hand, marks a value of 48, just like at the end of September when the price was at $45,000.



Fundamental Analysis

News of a fundamental nature is quite positive for Bitcoin. First of all we learn that both Microstrategy and El Salvador buy additional BTC in this deep, which denotes a further decline in the circulating BTCs available. On the other hand, however, the fear for the Coronavirus and its new variants are very reminiscent of the deep of March 2020 and at the same time as the Omicron news came out, BTC lost hits. Could this be an explanation of why PlanB missed the November forecast? We'll see.


On-Chain Analysis

Bitcoin's on-chain data hasn't changed much from the previous month. The reserves on the exchanges (CryptoQuant) are in sharp decline and this means that the available BTCs are less and less, as the demand is increasing but the supply is limited. This is a fact that is always interesting to observe as it indicates the movement of money to or from Bitcoin.



From the Hodl Waves chart, on the other hand, you can see how 6-12 month BTC holders are increasing at the expense of shorter-term ones. These investors are the ones who bought BTC 6 to 12 months ago, when the price was between $20,000 and $60,000. These are people who have arrived relatively recently, less than a year, but who are certainly making a profit at the moment. This information clearly tells us that there is an increasing amount of Bitcoin holders willing to hold the asset even if they may already close their position in profit, most likely because they believe there is additional profit margin.


As for the Bitcoin Dominance, however, it still moves within the range that goes from 40% to 48%, with a value of 41 at the moment. Conversely, the total Marketcap is in the ascending channel which took it to 2.59T. These data highlight how investors are entering the crypto market, but their focus is still partly on alt-coins.


So, after Novem-Bear...comes Dicem-Bull?

We arrive at the long-awaited final: does the data we have seen help us understand if the Stock to Flow is still valid?

It must be said that there is a substantial difference between the S2F model and the "worst case scenario" proposed by PlanB. The first, in fact, is a long-term predictive model that gives a general idea of ​​where the price of the asset can go over time. The second, on the other hand, was a possible scenario that the analyst proposed on the basis of some calculations. For this, the S2F still remains valid, at least for another month (according to the author). It must be said, however, that contrary to what is believed, BTC is affected and has been affected by the fear related to the Covid phenomenon. Both in March 2020 and in recent weeks, following less encouraging news and with lockdowns around the corner, investors have taken a big step back and this was not predictable from the Stock to Flow model. Therefore, a recovery and a rapprochement with the S2F line could be possible in the coming months, just as it already happened in April / May 2020. Finally, composing the data coming from the fundamental and on-chain analysis with the technical one, it is evident how the market is not convinced that a maximum is reached for this bull run. Indeed, the falling reserves on exchanges and non-selling investors make us think of a further imminent hike that would bring the price action back close to, if not above, the S2F line.



Not a financial advice.



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I am a pharmacist and a scientist.


A blog that speaks about science, a passion that has accompanied me since I was a child. My goal is to spread scientific culture all over the world, starting with cryptocurrencies.

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