The crypto strategist popular for applying the stock-to-flow (S2F) ratio to Bitcoin reveals that the model has printed a signal that has not been seen since the crypto bull run in 2017.
In a viral tweet, the anonymous analyst known as PlanB provides a crucial update to the S2F model for his 105,000 Twitter followers.
The S2F model compares the amount of commodity in circulation divided by the amount produced every year. The model is traditionally used to analyze the intrinsic value of precious metals such as gold and silver.
PlanB’s model shows that Bitcoin’s stock-to-flow ratio increases as the rate of new BTC supply decreases over time. The crypto analyst also illustrates how the value of Bitcoin closely follows the cryptocurrency’s S2F ratio using dots, which represent the monthly closing price of BTC.
The first red dot after a series of blue dots signifies the first month after each halving, an event that reduces the pace of new BTC entering circulation.
The chart shows that Bitcoin’s S2F ratio has increased and now coincides with the appearance of the red dot in PlanB’s model – the first such dot in three years. Based on PlanB’s chart, a red dot indicates the start of a new bull cycle.
But some analysts are not convinced that history will necessarily repeat itself. Crypto trader Mr. TA notes that Bitcoin is still in an extended bear market.
“[It is the] first time [Bitcoin has] been in a downtrend going into the halving. Will be interesting for sure to see what happens this time.”