The stock to flow is the number that we get when we divide the total stock by yearly production flow. So in the case of bitcoin and other store of value commodities like gold silver and platinum a high ratio indicates that the commodity is increasingly scarce and therefore more valuable as a store of value.
Btc Stock To Flow Chart In 2012 Vs Btc Stock To Flow Chart In 2020 Crazy How There Isn T Much Deviation Taken From Bitharingt In 2020 Flow Chart Book Exchange Chart
The original btc s2f model is a formula based on monthly s 2 f and price data.
Stock to flow. Flow is roughly analogous to rate or speed in this sense. A flow variable is measured over an interval of time. A stock is measured at one specific time and represents a quantity existing at that point in time which may have accumulated in the past.
The stock to flow s f ratio is a popular model that assumes that scarcity drives value. These differ in their units of measurement. It shows how many years is needed in order to produce all bitcoins currently in circulation.
Stock to flow is defined as a relationship between production and current stock that is out there. Therefore a flow would be measured per unit of time. Original stock to flow model.
Stock to flow ratios are used to evaluate the current stock of a commodity total amount currently available against the flow of new production amount mined that specific year. Sf stock flow. Stock to flow is a value calculated when total number of bitcoins in circulation is divided by number of bitcoins generated in a day and then divided by 12.
Economics business accounting and related fields often distinguish between quantities that are stocks and those that are flows. Bitcoin s price has historically followed the s f ratio making it a popular model for predicting future bitcoin valuations. On mar 22 2019 a pseudonymous individual under the handle planb published an article modeling bitcoin value with scarcity.
Once something becomes scarce enough it can be used as a money. The stock to flow line on this chart incorporates a 365 day average into the model to smooth out the changes caused in the market by the halving events. Since the data points are indexed in time.
In addition to the main stock to flow chart i have created a divergence chart lower section of the chart which shows the difference between price and stock to flow. In other words stock to flow ratios are used to evaluate the current stock of a commodity total amount currently available against the flow of new production amount mined that specific year. The higher the number the higher scarcity.
In the article planb argues that the price. Bitcoin btc stock to flow s2f model was published in march 2019 1. The stock to flow model implemented for bitcoin btc by seasoned analyst and trader planb analyzes the scarcity of an asset.
It is defined as the ratio of the current stock of a commodity and the flow of new production and is applied across many asset classes. For store of value sov commodities like gold platinum or silver a high ratio indicates that they are mostly not consumed in industrial applications. Stock to flow in this context means the relationship between the production of an asset and its available circulation quantity.
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