Stock to flow

Stock-to-Flow Model (S2F)
The Stock-to-Flow model describes the scarcity of an asset by comparing the existing stock to the annual production flow.

For Bitcoin:

• Stock: Bitcoins already in circulation
• Flow: Newly mined Bitcoins per year

Formula:$$\text{Stock-to-Flow} = \frac{\text{Stock}}{\text{Annual Production}}$$Stock-to-Flow=Annual ProductionStock​

Core Idea:
The higher the S2F ratio, the scarcer the asset—and the higher its long-term value is expected to be.

Relevance for Bitcoin:

• Due to halvings (approximately every 4 years), the flow is cut in half.
• This causes a sharp increase in the S2F ratio.
• Proponents (e.g., “PlanB”) argue that Bitcoin’s price has historically roughly correlated with the rising S2F.

Key Criticism:

• The model focuses almost exclusively on supply, ignoring demand.
• Its predictive power is disputed; especially since 2021, the price has deviated significantly from S2F projections.