Why Savvy Bitcoin Investors Are Reconsidering the Stock to Flow Model in 2024

You’ve probably heard the hype: Bitcoin’s stock to flow ratio is supposed to predict massive price surges before each halving. PlanB’s forecasts of $55,000 by early 2024 and $1 million by end of 2025 sound compelling. But here’s the uncomfortable truth—many of these predictions simply haven’t materialized as expected. So what’s actually going on with this “magic formula” for Bitcoin price prediction?

The Stock to Flow Concept: Why Scarcity Matters (But Maybe Not How You Think)

At its core, the stock to flow model tries to answer a deceptively simple question: how scarce is Bitcoin compared to how much new Bitcoin gets created each year?

Think of it this way—gold is valuable partly because it’s hard to mine more of it. The stock to flow ratio compares the total gold already extracted (stock) to the annual new production (flow). A high ratio means scarcity, which historically correlates with value.

Bitcoin applies the same logic. With only 21 million coins capped by its protocol, and halving events that cut mining rewards in half roughly every four years, Bitcoin’s stock to flow ratio climbs over time. Theoretically, as the ratio increases, prices should follow.

This is elegant in theory. It’s messy in practice.

How Bitcoin’s Halving Events Reshape the Scarcity Equation

Here’s where the model gets interesting—and where things get complicated.

Every four years or so, Bitcoin’s block reward slashes in half. This directly reduces the flow of new coins hitting the market. In 2024, that halving event happened, cutting mining rewards from 6.25 BTC to 3.125 BTC per block. From a pure scarcity perspective, this should tighten supply dramatically.

Historically, Bitcoin’s price has indeed spiked around halving events. The 2012 halving preceded a bull run. Same with 2016. Even 2020’s halving eventually led to Bitcoin reaching above $60,000 by late 2021.

But here’s the catch—correlation isn’t causation. Bitcoin also rallied to $69,000 in November 2021 due to institutional adoption, positive regulatory signals, and general market euphoria. Would stock to flow have predicted that without those external drivers? Unlikely.

Beyond Scarcity: What the Model Completely Misses

The stock to flow model’s fatal flaw is its tunnel vision. It obsesses over scarcity while ignoring nearly everything else that moves Bitcoin prices.

Regulatory shifts can crush or catalyze demand overnight. A country banning Bitcoin mining or a major institution exiting the space changes the game in ways scarcity ratios never capture.

Mining difficulty adjustments occur roughly every two weeks, recalibrating how fast new coins enter circulation. This isn’t a one-time halving event—it’s continuous fine-tuning that the model treats as static.

Market sentiment is volatile. Bitcoin crashed from $69,000 to $16,000 in 2022, not because scarcity changed, but because macro conditions shifted, inflation spiked, and risk appetite evaporated. Scarcity didn’t budge. Prices did—dramatically.

Technological advances matter too. The Lightning Network improving Bitcoin’s scalability, or innovations in security architecture, could expand use cases and attract demand independent of mining rewards. Vitalik Buterin himself criticized the stock to flow model as “harmful,” partly because it oversimplifies how value actually accrues in complex systems.

Competing cryptocurrencies also reshape the landscape. If Ethereum or newer blockchains offer better features or gain market share, Bitcoin’s demand can suffer despite unchanged scarcity metrics.

Expert Skepticism: Why Even Bitcoin Advocates Have Doubts

Adam Back, CEO of Blockstream and an early Bitcoin contributor, views the model as a reasonable historical fit. Yet even he acknowledges it’s curve-fitting past data, not predicting the future with certainty.

Alex Krüger, a respected crypto economist, is blunter—he calls the model’s methodology “nonsensical” for extrapolating prices based purely on flow ratios.

Cory Klippsten from Swan Bitcoin worries the model confuses newcomers into making uninformed bets, while Nico Cordeiro at Strix Leviathan challenges whether scarcity alone drives value without accounting for demand elasticity and macro conditions.

Even Bitcoin’s long-term believers recognize the model has limits. It’s one lens, not the truth.

When Stock to Flow Actually Works (And When It Doesn’t)

The model excels at one thing: identifying when Bitcoin is historically oversold or overbought relative to its scarcity. After the 2022 crash, Bitcoin traded well below what the stock to flow ratio suggested was “fair value.” That turned out to be a reasonable buy signal in hindsight.

Where it fails spectacularly: predicting specific price targets or timing. The model’s bullish forecasts for 2023 largely missed. Bitcoin reached $43,000 when some predictions pegged $100,000+. That’s not a minor miss—it’s a confidence-shaking gap.

For day traders, the stock to flow model is essentially useless. Its signals come too late and are too broad for tactical trading. For long-term investors ignoring daily noise, it offers psychological comfort and a rough framework for valuing Bitcoin’s scarcity premium.

How to Actually Use Stock to Flow in Your Investment Strategy

If you’re considering the model as part of your research toolkit, here’s a realistic framework:

First, understand what it measures. The stock to flow ratio quantifies scarcity relative to production. It doesn’t predict crashes, regulatory crackdowns, or black swan events. Accept that limitation upfront.

Second, use it as one input among many. Combine it with technical analysis, on-chain metrics (like exchange inflows/outflows), fundamental metrics (Bitcoin adoption rates, transaction volume), and sentiment analysis. No single model captures everything.

Third, distinguish between time horizons. Stock to flow has some correlation with Bitcoin’s 4-year halving cycle trends. It’s garbage for picking weekly movements. If you’re thinking in terms of years, not months, the model becomes somewhat relevant.

Fourth, manage risk properly. Even if stock to flow says Bitcoin “should” rally, that doesn’t guarantee it will. Set stop losses. Size positions based on your risk tolerance, not on model confidence. Recognize that past correlation with halving cycles doesn’t guarantee future alignment.

Fifth, stay alert to changing conditions. Bitcoin’s market structure is evolving. Spot ETFs, institutional participation, and regulatory clarity are reshaping the game in ways the original stock to flow model didn’t anticipate. Models need updating as markets mature.

The Real Limitations You Need to Know

The stock to flow model assumes scarcity is the primary value driver. But what if it’s not? What if Bitcoin’s value is increasingly determined by network effects, adoption, and utility? The model has no mechanism to capture those shifts.

It also oversimplifies supply dynamics. Mining difficulty changes constantly. Economic incentives matter—if Bitcoin falls too far, less efficient miners shut down, potentially constraining supply in ways the model doesn’t account for.

Short-term inaccuracy is its worst problem. The gap between predicted and actual prices in any given year is often massive. Investors using this model for tactical decisions get whipsawed.

Finally, it ignores that Bitcoin operates within a broader macroeconomic context. During inflationary periods or financial crises, Bitcoin’s demand as a hedge might spike independently of scarcity metrics. During risk-off environments, it might crash regardless of how scarce new coins become.

What Actually Drives Bitcoin Prices (Beyond Stock to Flow)

Real-world Bitcoin movements result from a complex interplay: regulatory news, macro conditions, technological breakthroughs, institutional capital flows, competing assets, and yes, sometimes scarcity signals.

The stock to flow model captures one variable in a multivariate equation. Treating it as the sole predictor is like predicting stock prices based only on earnings per share while ignoring interest rates, competition, and industry disruption.

That said, scarcity isn’t irrelevant. Over very long timeframes—multi-year cycles—Bitcoin’s capped supply relative to growing adoption does seem to matter. The model just isn’t granular enough to predict what happens quarter to quarter.

The Bottom Line: Stock to Flow as One Tool, Not Gospel

The stock to flow model remains useful for long-term investors who see Bitcoin as a store of value where scarcity is the fundamental thesis. It provides a framework for thinking about Bitcoin’s value proposition in a way that resonates with historical precious metals analysis.

But positioning it as a price prediction oracle? That’s where the model breaks down. Too many variables, too much uncertainty, too much room for surprises.

Use stock to flow as part of a diversified analytical toolkit. Check it alongside technical indicators, fundamental metrics, and market sentiment. Recognize its strengths—identifying extreme valuations over multi-year cycles—and respect its weaknesses—complete blindness to external catalysts.

Bitcoin’s future will be shaped by scarcity, yes, but also by adoption curves, regulatory evolution, technological innovation, and macroeconomic conditions that no single model can fully predict. The investors who thrive long-term are those who understand this complexity rather than betting everything on a formula.