Stock-to-Flow Bitcoin Ratio Now Predicting $288,000 Bitcoin
PlanB is a pseudonymous character on Twitter known as an investing whale in the crypto space. He is also the inventor of the stock-to-flow Bitcoin pricing model that seems to accurately predict the future price of the world’s most valuable digital currency time and time again. Although we don’t know his real name, when PlanB speaks (or tweets), the cryptocurrency community listens. What we’re all hearing now is that he’s predicting a $288,000 Bitcoin.
PlanB’s most recent statement says the stock-to-flow model is proving itself as a valid pricing model ‘like clockwork’, with the price of Bitcoin flirting with the $12,000-mark. PlanB has previously stated that every time the supply of new Bitcoin cuts in half (halving occurs approximately once every four years ), the stock-to-flow model spikes, which directly indicates the price of Bitcoin will increase. He explains his model in detail in a post on Medium.com from March, 2019.
A Basic Overview of the Stock-to-Flow Pricing Model
Stock-to-Flow essentially assumes that the scarcity of Bitcoin is somewhat similar to the scarcity of traditional precious metals like gold and silver. Each of these assets retains value over a long period of time because of the increasing scarcity of obtaining more of those assets.
The difference is that in the case of gold and silver it becomes harder and harder to mine the materials. In the case of Bitcoin, an algorithm cuts the supply of new Bitcoin’s in half every four years. This means the currency will become more and more scarce over time.
Stock-to-flow ratio is used as a tool to evaluate the current stock of a commodity (the total amount currently available) versus the flow of new bitcoins being produced (the amount mined during a specific year). The higher the ratio is, the scarcer the commodity is. The scarcer the commodity is, the higher the value of it.
Other Reasons to Trust Stock-to-Flow Ratio
Cameron and Tyler Winklevoss are the two billionaire twins behind Gemini, one of the world’s leading crypto exchanges. They believe that the devaluation of the American dollar and the fact that famed stock market investor Warren Buffett recently moved $6 billion in assets away from American dollar investments is also a reason to trust that Bitcoin is going to skyrocket beyond the quarter million-dollar range.
When will scarcity be reflected in the actual value of a single Bitcoin exactly? We may have to wait four more years for the next halving event in order to find out.
Written by: Jack Choros
Writer, content marketing at Netcoins.