The Bitcoin stock-to-flow (S2F) model created by pseudonymous analyst PlanB, which analyzes the supply dynamics of Bitcoin and its scarcity enforced by the protocol’s halving of miner rewards every four years, is predicting a monthly close of around $98,000 for November.
According to PlanB, his model’s predictions have actualized — for the most part. The analyst shared that both August and September resonated closely with the actual monthly closing price of $47,000 and $43,000, respectively.
In October, PlanB’s S2F model predicted a monthly closing price of $63,000, but the actual number came a bit short, $61,000, a 3% rounding error. “Close enough for me,” PlanB said.
The model calculates a ratio between the existing supply of an asset and the amount of new units entering the market. Since Bitcoin’s mining schedule is fairly predictable, data can be leveraged to understand how scarce BTC is compared to other assets, like gold.
The analyst also commented on price predictions for the next couple of months. According to the S2F model, Bitcoin is set to end November at around $98,000 and December at approximately $135,000. Whether BTC will keep tracking the S2F is a different story.
The S2F model’s price predictions are far from perfect, however, and both the predictions and the model itself have received their fair share of criticism lately. One analyst argues that the S2F is a chameleon model, meaning that it is allegedly “built upon dubious assumptions and…given more credence” than it deserves. Such assumptions lead to a belief that scarcity drives prices, but this is also a disputed claim.
Nonetheless, plenty of people in the Bitcoin community highlight how scarcity is indeed a driver for price. As the amount of BTC being created on a yearly basis keeps decreasing every four years and the demand rises due to growing awareness and adoption, it is assumed that the price “will go up forever.” Although that is likely the case, as demonstrated over the past 10 years, the accuracy of S2F will be assessed on every monthly close — something both skeptics and evangelists will keep an eye on.