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31 July 2021

Stock-to-flow model possibly invalidated as Bitcoin price loses $30K

Stock-to-flow model possibly invalidated as Bitcoin price loses $30K

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Since Bitcoin has a maximum supply limited to 21 million tokens and considering the time- and energy-intensive mining process, there is only a certain number of new Bitcoin that can come into circulation in a certain timeframe.

In fact, earlier this year, PlanB suggested that Bitcoin could hit$450,000 before the end of this year in the best-case scenario, and $135,000 in the “worst-case scenario.“ Furthermore, the model predicts that Bitcoin is expected to hit its much-awaited $1 million mark in July 2025.

However, in a PlanB Twitter poll on June 21, 41% of respondents thought that Bitcoin will remain under $100,000 this year.

He went on to say that for believers in the S2F model, this is a great time to buy Bitcoin as this price drop could be perceived as an unexpected dip.

Lyu touched upon this changing scenario in the cryptocurrency market as well, saying, “the emerging projects and altcoins on the market with diversified application scenarios will distract investor attention and diversify their existing investment portfolios, thus continuously fluctuating the Bitcoin market.” This change is evident in the fact that, since the beginning of this year, Bitcoin’s dominance as the premier cryptocurrency has fallen from over 60% to its current 46.3%, signifying a growing altcoin sector.

While the S2F model is one of the most widely known quantitative models that predicts Bitcoin’s price in the short term (less than five years), there are several other models that are often used to gauge its price potential

He went on to explain the probability of PlanB’s S2F model actually coming into fruition this year: “Of course, anything can happen, but from my point of view, there is less than 20% of probability, based on Monte-Carlo simulations, that the Bitcoin price will reach a value greater than $100,000 in 2021.”

That said, it is important to remember that Bitcoin was exchanging hands at $18,000 for a few days in the March 2017 bull run and went straight to trading at $64,000 earlier in February this year. 

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