Bitcoin Stock-to-Flow: An In-Depth Analysis Beyond Simple Predictions

Why the Stock-to-Flow Model Has Drawn Attention

Since its inception in 2009, Bitcoin has become the first fully digital, highly transparent, and supply-predictable asset. This predictability is precisely what makes it attractive—unlike traditional fiat currencies that may face inflation risks, Bitcoin’s total supply is permanently capped at 21 million coins. This feature has revitalized an ancient economic tool—the Stock-to-Flow (S2F) model.

When Bitcoin surged to $69,000 in November 2021, the market began to seriously examine this model. Although it later experienced intense cyclical volatility, many long-term participants still believe the S2F framework can reveal Bitcoin’s future value trajectory. The core of this confidence rests on a simple yet powerful assumption: scarcity determines value.

Understanding the Two Dimensions of Supply Scarcity

The Stock-to-Flow model is fundamentally a scarcity quantification tool, originally used to assess the value of precious metals (especially gold and silver). Its calculation logic revolves around two core parameters:

Stock refers to the total amount of an asset that has already been mined and is in circulation. For Bitcoin, this is the total number of coins that have been mined.

Flow is the amount of new supply added over a unit of time, typically measured annually. For the Bitcoin network, this depends on the new coins mined each year.

The S2F ratio is obtained by dividing the stock by the flow. A higher ratio indicates how long it would take for the annual flow to fill the existing stock—meaning the higher the ratio, the scarcer the asset. Gold is considered a store of value precisely because of its enormous S2F ratio.

How Bitcoin’s Supply-Reducing Mechanism Changes the Game

Bitcoin’s technical design incorporates a unique scarcity reinforcement mechanism: halving of mining rewards at regular intervals. Approximately every four years, the rate of new coin issuance automatically decreases by 50%. This is not a policy decided by any central authority but an immutable rule embedded in the code.

As of December 2025, Bitcoin’s price has returned to around $89,000. Historically, each halving event has been followed by a significant jump in Bitcoin’s S2F ratio, which supporters of the S2F model interpret as a precondition for price increases. When mining flow decreases while stock remains unchanged, the scarcity indicator inevitably rises, theoretically driving a revaluation of the asset.

The profound aspect of this design is that Bitcoin’s supply curve is not a straight line but a staircase that becomes steeper with each halving. Each halving reinforces this scarcity narrative.

Going Beyond a Single Variable: Other Price Determinants Beyond S2F

However, attributing all of Bitcoin’s price momentum solely to the S2F ratio oversimplifies the picture. In reality, multiple forces act simultaneously:

Mining difficulty adjustments—While Bitcoin’s block time is fixed (roughly 10 minutes), the network adjusts mining difficulty every two weeks. This influences the pace of new coin issuance, thereby affecting the flow.

Expansion of market acceptance—From institutional entry to sovereign wealth fund allocations, the demand side of Bitcoin is undergoing structural changes. Growing demand can push prices higher even with a fixed supply.

Regulatory environment evolution—From the US approval of spot Bitcoin ETFs to global policy shifts on cryptocurrencies, regulatory changes can move prices faster than scarcity factors.

Blockchain ecosystem iterations—Improvements like the Lightning Network, smart contract capabilities on Bitcoin, and other layer 2 solutions can expand Bitcoin’s use cases, influencing long-term demand.

Market sentiment cycles—Macroeconomic pressures, geopolitical events, and investor sentiment can cause volatility that sometimes exceeds fundamental factors.

Competitive landscape—The rise and fall of other cryptocurrencies also shape Bitcoin’s attractiveness as the dominant asset.

These factors weave together a complex ecosystem influencing Bitcoin’s price. While S2F has logical appeal, it is far from the whole story.

The Historical Accuracy of the S2F Model

The model’s creator, PlanB, made a series of predictions based on the S2F framework. In the 2024 halving, the model anticipated Bitcoin could reach $55,000; more aggressive long-term targets set a breakthrough of over $1,000,000 by the end of 2025.

How has reality matched up? Bitcoin indeed entered an upward cycle after halving, but the $1 million target has not yet been achieved. This raises a key question: Can the historical relevance of S2F guarantee its predictive power for the future?

Charts show that during certain cycles (especially at bear market bottoms), Bitcoin’s price tends to hover around the S2F curve. But during extreme sentiment phases (mania or panic), prices often deviate significantly from this line. This indicates that S2F is a useful reference but not an iron law.

Academic and Industry Skepticism

Ethereum co-founder Vitalik Buterin openly called the S2F model “quite unreliable,” criticizing its flattening of supply and demand dynamics. He pointed out that linear extrapolation of historical data cannot capture the market’s true complexity.

Blockstream CEO Adam Back was more moderate, viewing S2F as a reasonable fit to historical data but not denying its limitations in prediction.

Cory Clippsten, founder of Swan Bitcoin, warned investors not to be misled by a single model, while well-known trader Alex Krueger directly dismissed the predictive framework of S2F.

Nico Cordeiro, investment director at Strix Leviathan, noted that the model’s overemphasis on “scarcity” neglects other value drivers like utility and network effects.

The consensus: S2F has its reference value but should not be the sole basis for decision-making.

Structural Weaknesses of the S2F Model

Incomplete information—S2F focuses on supply-side scarcity but cannot quantify changes in demand. An asset can be extremely scarce but if no one wants it, the price won’t soar.

Extrapolation pitfalls of historical data—Past correlations do not guarantee future performance. Bitcoin’s market is still evolving, with changes in participant structure, market depth, and derivatives markets altering the game.

Underestimating utility—As Bitcoin’s functions expand (payments, smart contracts, cross-chain bridges), its value should not be understood solely through scarcity. Just as gold has industrial uses besides being scarce, Bitcoin’s future value may derive more from its role as financial infrastructure than from scarcity alone.

Fixed parameters assumption—S2F assumes halving occurs on schedule, the network remains secure, and rules stay unchanged. But what if Bitcoin governance rules change? Though unlikely, it’s not impossible.

How to Rationally Use S2F for Decision-Making

As a reference framework, not a prediction tool—S2F is best viewed as one perspective to understand Bitcoin’s long-term value trajectory, similar to the P/E ratio in value investing—meaningful as a reference but not the sole decision factor.

Combine with multi-dimensional analysis—Integrate S2F with technical analysis (chart patterns, volume), fundamentals (on-chain activity, institutional holdings), and sentiment indicators (market fear/greed index) to form a comprehensive view.

Recognize cycle characteristics—Long-term investors should understand that S2F is more suitable for identifying multi-year trends rather than short-term trading. If your time horizon is 4-8 years, S2F’s reference value is more relevant.

Set risk thresholds—Even if you believe in the S2F framework, establish clear stop-loss and risk management strategies. Avoid putting all your chips on any single model.

Continuously monitor external variables—Pay attention to regulatory policies, macroeconomic data, competitive landscape, and technological breakthroughs—these can rewrite Bitcoin’s value story faster than changes in S2F parameters.

Looking Ahead: The Future Applicability of S2F

The S2F model in Bitcoin’s history functions like a lighthouse—providing direction in fog but not GPS. Its practical utility will evolve with market maturity.

As Bitcoin’s market cap continues to rise, institutional participation deepens, and derivatives markets mature, market behavior may shift from scarcity-driven to a hybrid model driven by liquidity, policy, and utility. In this context, the explanatory power of S2F may weaken relatively, but its role as a “scarcity dimension” reference will persist.

Bitcoin’s future price will ultimately be determined by a multi-variable equation: scarcity (S2F) + demand growth + technological iteration + policy orientation + market sentiment. No single model can fully describe this equation, but S2F is undoubtedly a significant coefficient within it.