The bull run is coming: Bitcoin’s stock-to-flow model confirms the 2020 Bitcoin Rally
The bull run is coming: Bitcoin's stock-to-flow model confirms the 2020 Bitcoin Rally
The end of the year is usually a good time to check some Bitcoin price predictions. One model that has gained popularity this year is the stock-to-flow model – and further research shows that the BTC price patterns are correct.
Bitcoin S2F in detail
The model was originally introduced by market analyst “PlanB”, who modeled the Bitcoin price through scarcity at the beginning of the year.
ICYMI: the original stock-to-flow article, with underlying theory and hypothesis, and description of the S2F model.https://t.co/n5P5uMCKHT
— PlanB [Jan/3➞🔑] (@100trillionUSD) December 22, 2019
“Stock to Flow” was described as the ratio of the quantity of a product that is kept in stock (or the current edition) – divided by the quantity produced annually. The model has been and is increasingly used for BTC price forecasts as the halving in May will cut supply and inflation in half. And that doubles the S2F ratio.
Dutch Linux administrator Rob Wolfram has continued to research the model to determine future movements in the Bitcoin price.
The researcher found that the extrapolation values in the future are likely to differ from the values for the next month, so testing older values could be more accurate.
The previous two halves in 2012 and 2016 caused the stock-to-flow ratio to increase steeply the following year. Wolfram used these two data sets for his forecasts instead of using current data.
A comparison of the logarithmic values was overlaid on the historical Bitcoin price chart to anticipate future movements. The diagrams are remarkably well aligned.
He also extracted the approximately one million “ghost coins” that are believed to be held by Satoshi himself.
The Bitcoin price predictions largely match those predicted by PlanB in its original analysts in May.
“It seems that the periods when the stock-to-flow ratio increases significantly provide the best prediction of future value. I look forward to seeing the impact of the next halving event in May 2020. ”
Is that all nonsense?
The model was recently challenged by Bloomberg Digital news director Joe Weisenthal, who described it as nonsense in a controversial tweet.
Ok, since nothing's going on today, I'm going to do a quick thread on why the concept of using Stock-to-flow analysis (or any other future supply based model) is complete nonsense for anticipating the future value of Bitcoin 1/
— Joe Weisenthal (@TheStalwart) December 23, 2019
His theory: Bitcoin intake is not a driving factor in the value of the asset. People’s preference to consider it part of the global market portfolio, which includes real estate and precious metals, will affect prices.
Bitcoin is currently holding over $ 7,000 – exactly where it should be stock-to-flow. A halving FOMO next year could well initiate a larger rally, which would further confirm the correctness of the model.