Why the Stock-To-Flow Bitcoin Valuation Model Is Wrong…
There have been many a post here regarding PlanB’s Stock-to-Flow model so I thought some here may enjoy reading this…
Why the Stock-to-Flow Bitcoin Valuation Model Is Wrong
“PlanB’s paper ‘Modeling Bitcoin Value with Scarcity’ states that certain precious metals have maintained a monetary role throughout history because of their unforgeable costliness and low rate of supply. For example, gold is valuable both because new supply (mined gold) is insignificant to the current supply and because it is impossible to replicate the vast stores of gold around the globe. PlanB then argues this same logic applies to bitcoin, which becomes more valuable as new supply is reduced every four years, ultimately culminating in a supply of 21 million bitcoin.
Low rate of supply, which PlanB defines as ‘scarcity,’ can be quantified using a metric called Stock-to-Flow (SF), which is the ratio between current supply and new supply.
This premise is then translated into the hypothesis, ‘…that scarcity, as measured by SF, directly drives value.’ PlanB then plots bitcoin’s SF against USD market capitalization as well as two arbitrarily chosen SF data points for gold and silver.'”
Here’s the original and longer paper…. https://strixleviathan.com/blog/2020/6/29/a-chameleon-model-why-bitcoins-stock-to-flow-model-is-fatally-flawed