creator thinks it’s still valid

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Bitcoin’s current price is far from comparable to the stock-to-flow (S2F) model’s valuation.

Data provided by blockchain analytics service Glassnode shows That Bitcoin It is currently worth only 15% of its S2F estimated present value of around $109,000. As of press time, Bitcoin is trading at $16,700, having gained 0.08% in the last 24 hours.

Bitcoin's Stock-to-Flow Deflection Hits All-Time Low: Creator Thinks It's Still Valid - 1
Bitcoin’s stock-to-flow deviation. Seven-day moving average chart. | Courtesy of Glassnode

Although Bitcoin’s price has never advanced below the price estimated by the stock-to-flow model, it has exceeded that value quite significantly in the past. In 2011 – when Bitcoin was trading at $18.72 – Bitcoin’s S2F deviation was 30.76, which means it was trading at almost 31 times the estimated price.

The S2F model is a method of valuing goods based on the relationship between the current supply of goods and the rate at which they are overproduced.

For those who believe in its utility, in this case, Bitcoin’s value is directly proportional to its scarcity, with a higher stock-to-flow ratio indicating a higher value. The model gained popularity because it successfully predicted the long-term price of Bitcoin in the past with a remarkable degree of accuracy.

The model’s predictions are designed with the idea that bitcoin’s value should increase as the stock of bitcoin increases and the flow of new bitcoin slows — a halving of the issuance rate that occurs every four years. This is because the decreasing supply of new Bitcoin combined with increasing demand will lead to higher prices.

Bitcoin's Stock-to-Flow Deflection Hits All-Time Low: Creator Thinks It's Still Valid - 2
Bitcoin’s stock-to-flow model. | Buy Globally Courtesy of Bitcoin

As can be seen in the chart, Bitcoin has fallen below its expected value in the past few years – but not as much as it has in the past. The model was developed by PlanB recently recommended Bitcoin will soon realign itself with the S2F model and be worth “$100,000 to $1 million”.

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