Bitcoin’s value remains one of the most debated topics in modern finance, with analysts and investors constantly seeking reliable models to forecast its price movements. Among these, the Stock-to-Flow (S2F) model has gained significant attention for its unique approach—focusing on scarcity as a core driver of value.
But what exactly is the Stock-to-Flow model, and how does it apply to Bitcoin? Let’s break it down in detail.
Understanding the Stock-to-Flow Model
The Stock-to-Flow (S2F) model is a quantitative framework used to measure an asset’s scarcity by comparing its existing supply (“stock”) to the amount newly produced each year (“flow”). The higher the ratio, the scarcer the asset is considered to be—making it potentially more valuable over time, especially if demand remains steady or increases.
This concept isn’t new. It's long been applied to precious metals like gold and silver, which have historically maintained value due to their limited supply and consistent demand.
Here’s how it works:
- Stock = Total existing supply of the asset
- Flow = Annual new production
For example:
- Gold has an estimated total stock of 200,000 metric tons
- Around 3,000 metric tons are mined annually
This gives gold a Stock-to-Flow ratio of approximately 66.67, meaning it would take over 66 years of current mining output to match the existing supply.
👉 Discover how digital scarcity compares to traditional assets today.
Why Bitcoin Fits the S2F Model
Bitcoin stands out because it was designed with programmed scarcity—a feature no other digital or physical asset possesses to this degree.
Key features that make Bitcoin ideal for S2F analysis:
- Fixed maximum supply: Only 21 million BTC will ever exist.
- Predictable issuance: New bitcoins are created through mining at a fixed rate.
- Halving events: Every 210,000 blocks (roughly every four years), the block reward is cut in half, reducing annual supply growth.
After the 2020 halving:
- Stock: ~18.5 million BTC in circulation
- Flow: ~328,500 BTC mined per year
- S2F ratio: ~56.3
This placed Bitcoin’s scarcity level close to that of gold (~66) and far above silver (~22).
And following the 2024 halving, when the block reward dropped from 6.25 to 3.125 BTC:
- Annual issuance halved again
- Flow reduced to ~164,250 BTC per year
- With stock nearing 19.7 million BTC, the S2F ratio jumped to approximately 119
This projected surge in scarcity is one reason many analysts believe each post-halving cycle could drive significant upward pressure on price—if demand keeps pace.
How the S2F Model Predicts Bitcoin’s Price
The core hypothesis behind the S2F model is simple: as supply growth slows, scarcity increases, which should drive up value—assuming demand remains constant or grows.
In 2019, a pseudonymous analyst known as PlanB published research linking Bitcoin’s historical price to its evolving S2F ratio. His model suggested a strong logarithmic correlation between the two, implying that Bitcoin’s price tends to rise predictably as it becomes scarcer.
According to PlanB’s original S2F model:
- After the 2024 halving, Bitcoin’s S2F ratio would surpass gold’s
- This increased scarcity could justify a much higher market valuation
While not a guaranteed price predictor, the model gained traction during bull runs when Bitcoin’s price closely followed its projected S2F trajectory.
However, it's important to understand that correlation does not equal causation—and many experts caution against relying solely on this metric.
Criticisms and Limitations of the S2F Model
Despite its popularity, the Stock-to-Flow model faces valid criticism from economists and market analysts.
1. Ignores Utility and Adoption
The S2F model focuses almost exclusively on supply-side dynamics but overlooks key demand-side factors such as:
- Real-world use cases (e.g., remittances, store of value)
- Institutional adoption
- Regulatory developments
- Technological upgrades (like the Lightning Network)
An asset can be scarce, but without utility or trust, its value may not increase.
2. Reliance on Historical Patterns
The model assumes past price behavior will repeat in the future. However, Bitcoin’s market has evolved dramatically—from niche tech curiosity to global financial asset. What drove price in earlier cycles may not apply now.
3. Oversimplifies Market Dynamics
Financial markets are influenced by complex forces:
- Macroeconomic conditions (inflation, interest rates)
- Investor sentiment
- Geopolitical risks
- Exchange inflows/outflows
The S2F model doesn’t account for any of these variables.
4. Failed Predictions
Following the 2022 crypto market downturn and extended bear market, Bitcoin’s price significantly underperformed S2F projections. This divergence led many to question the model’s reliability in volatile or risk-off environments.
Frequently Asked Questions About Bitcoin Stock to Flow
What is the Stock-to-Flow ratio?
It’s a measure of an asset’s scarcity calculated by dividing total existing supply (stock) by annual new production (flow). A higher ratio indicates greater scarcity.
Who created the Bitcoin Stock-to-Flow model?
The model was popularized in 2019 by a Dutch investor using the pseudonym PlanB, who applied it specifically to forecast Bitcoin’s long-term price based on its halving cycles.
Does the S2F model work for all cryptocurrencies?
No. Most cryptocurrencies lack Bitcoin’s fixed supply and predictable emission schedule. Without enforced scarcity, the S2F ratio is less meaningful.
Is Bitcoin more scarce than gold?
Yes—in terms of annual supply growth. After the 2024 halving, Bitcoin’s inflation rate dropped below 1% per year, lower than gold’s ~1.5–2%. Its S2F ratio also now exceeds gold’s.
Can scarcity alone determine Bitcoin’s price?
Not entirely. While scarcity creates potential value, actual price depends on market demand, adoption, macro trends, and investor confidence. Scarcity is just one piece of the puzzle.
👉 See how real-time data reflects evolving scarcity models.
Other Models Used to Analyze Bitcoin’s Value
While S2F focuses on supply scarcity, other frameworks offer complementary insights:
- Network Value to Transactions (NVT) Ratio: Often called the “PE ratio of crypto,” it compares Bitcoin’s market cap to on-chain transaction volume—helping identify overvaluation or undervaluation.
- Metcalfe’s Law: Suggests network value is proportional to the square of active users—implying that adoption drives exponential value growth.
- MVRV Ratio (Market Value to Realized Value): Helps determine whether Bitcoin is trading above or below its historically fair value based on when coins were last moved.
These models, combined with S2F, provide a more holistic view of Bitcoin’s valuation landscape.
Final Thoughts: Is Stock-to-Flow Still Relevant?
The Bitcoin Stock-to-Flow model offers a compelling narrative: digital scarcity mirrors the properties of sound money like gold. Its simplicity makes it accessible, and its track record during certain bull markets gave it credibility.
Yet, it should not be used in isolation. Rather, it serves best as one tool among many in understanding Bitcoin’s long-term potential.
As markets mature and institutional involvement grows, investors need multifaceted analysis—balancing supply metrics with real-world adoption, macroeconomics, and technological progress.
Whether or not you believe in S2F as a price predictor, one thing is clear: Bitcoin’s built-in scarcity is unprecedented in financial history, and that alone makes it worth watching.
👉 Explore how scarcity-driven assets are reshaping modern investing.