But not $ 100,000? – Study „refutes“ the stock-to-flow model

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A market researcher does not see the interplay between the rate of increase and the amount in circulation as a decisive criterion for the price development of Bitcoin.

A new study by the blockchain market researchers from ByteTree claims to have refuted one of the most popular forecasting models for Bitcoin ( BTC )

The so-called stock-to-flow calculation model (S2F) had repeatedly made very accurate predictions about the market-leading crypto currency in the past, with an optimistic price target of more than 100,000 US dollars in the long term .

ByteTree co-founder and investment director Charlie Morris devoted the entire fourth chapter of the study to the “refutation” of the stock-to-flow model. The forecast model has been tried and tested because it has been used for decades to calculate the price development of commodities such as gold and silver. The stock-to-flow model considers the existing volume in circulation (stock) in relation to the rate of increase in the volume in circulation (flow) and derives the so-called degree of hardness of an asset from this. Since Bitcoin Profit so conceived is that the rate of increase over time continues to fall, while the existing circulation rate remains the same and a fixed upper limit has, there is a relatively high degree of hardness that justifies an astronomical price performance for cryptocurrency.

Even the Bayrische Landesbank has calculated a similarly optimistic forecast with the help of the model

Morris argues that the price development of Bitcoin is not based solely on the available supply, but that the interplay between supply and demand is the driving force here too. Since the supply of the cryptocurrency is fixed, it is demand that is the decisive variable.

In addition, Morris accuses the model of overvaluing newly flowing units of the cryptocurrency, as if only these were available for purchase, but he replies that “anyone who owns Bitcoin can sell them at any time. Accordingly, the dynamics between the amount in circulation (stock) and the rate of increase (flow) would change over time:

“If the network has a large amount in circulation and a relatively small rate of increase, then the amount in circulation is even more important. The smaller the rate of increase, the less impact it has on the price development. “

Accordingly, the influence of the Bitcoin miners on the price would have continued to decline, which can be seen from the fact that their sales are becoming smaller and smaller compared to their market capitalization:

“Miners used to have 50% of the market capitalization as revenue. At that time they had a huge impact on the price, but at only 1.7% they no longer have that. They used to be responsible for 68% of the total transaction volume, which now only amounts to 3.9%. “
The miners would still be essential for the infrastructure of the Bitcoin blockchain, but their “economic footprint is getting smaller and smaller”.

As a final point of criticism, Morris brings up that the model does not sufficiently take into account the use and acceptance of Bitcoin, because this is where he sees the actual intrinsic value of the cryptocurrency:

“I would argue that Bitcoin is a powerful digital network that is very much alive. It’s kind of a tech stock, only there is no profit distribution or a managing director, but it offers high security, wide distribution, and usability. There are many reasons that Bitcoin’s price will continue to rise, but the stock to flow ratio is not one of them. „