A new twist on the Bitcoin stock-to-flow model (S2F) suggests the crypto king will blow past $520,000 – but it may take a while.
A pseudonymous quantitative analyst named QuantMario says PlanB’s popular S2F ratio, which divides the amount of BTC in circulation by the amount of Bitcoin mined per year, is overly bullish.
“After the fifth halving in about eight years from now, the original S2F model predicts the Bitcoin market capitalization to be higher than the value of all the property in the world: equities, real estate, fiat money, gold, etc. Sounds impossible? Right.”
Crypt∞li, an editor at the crypto exchange startup SAFEX, says the new model, which shows BTC will make a slow and steady march to about $520,000 over the next two decades, places more realistic expectations on miner profitability and the overall use of electricity on the network.
“The S2F model’s output basically demands a 10x price increase from one cycle to the next cycle. If a constant profitability of miners is assumed (equilibrium of price and miner adoption), then the mining effort has to quintuple every four years – the combination of a tenfold increase of price and a halving of the block reward results in a five-fold increase of reward in fiat currency every four years.”ADVERTISEMENT
To address these issues, the adjusted S2F model predicts a significantly slower pace of growth for BTC.
In contrast, PlanB’s model predicts Bitcoin will hit $1 million by 2028.
Despite his adjustments, QuantMario admits that PlanB’s model closely tracks Bitcoin’s past price movements, and if this continues, a much larger rally is coming over the next few years.
“The past three halving cycles have each seen the formation of a price bubble that exceeded the error bands of the LGS-S2F model for a short time. If this happens again, we can expect to see the price peak at $100k during the coming cycle.”