Bitcoin Stock-To-Flow Model

hey everyone and thanks for jumping back into the cryptoverse today we're going to talk about Bitcoin and we're going to be discussing the stock tolow model if you guys like the content make sure you subscribe to the channel give the video a thumbs up and also check out the sale on into the cryptoverse premium at intothe cryptoverse decom as always when we discuss a model that is not mine we have to give credit where credit is due there are a lot of people that don't do that but it is important that you provide credit where

it's to and the creator of this model is Plan B I'm sure a lot of you guys know him over on X formerly Twitter he is his handle is 100 trillion USD I'll link his his um his profile down in the description below in case you guys want to give him a follow which I believe that you should now the stock to flow model is generally a fairly optimistic model and I don't know how many people were around back in in 2019 in in in Bitcoin but the there was sort of there's multiple stock to

flow models right I mean obviously there is the stock to flow cross asset model there is the stock to flow model sort of calling for 100k but I mean there was also another model before that one where the average price of Bitcoin predicted by the stock to flow I think was around 55k and and last cycle you know that original model at around 55k I mean this one went all the way up to 100 but that original model when around 55k was actually fairly accurate um would have uh it would have almost basically been been

perfect I I think if it you know sort of that 50k instead of 100 but if you're not familiar with the stock to flow model it's basically defined as a total Bitcoin Supply divided by the flow of annually annual newly issued Bitcoin so it assumes that since it's a deflationary asset the scarcity will increase the value now obviously there's a lot of arguments about you know Supply isn't necessarily indicative of demand but we also know that through the cycles Bitcoin has not necessarily been lacking in demand either it seems like every cycle there is some

new narrative that we cling on to um and and we see the price of Bitcoin go up now I will remind you that narrative follows price not the other way around and I do think a lot of people will sort of cling on to certain ideas as to the reason why bitcoin's going up this cycle it was largely due to the ETFs right I mean how many of you guys have have probably sort of um assumed that the reason the price goes up is because of the ETFs and I'm not saying that there haven't been

positive flows there um but you know the ETFs launched and then from you know know from March until October the price of Bitcoin wasn't really going anywhere even though the even though we continue to see people buying up those ETFs and one of the things to remember is if you look at at Roi sort of the cycle Roi from the low um I'm not looking at the right ones right uh Roi from the bottom and you compare this cycle to two cycles ago I mean it's kind of the exact same thing and we didn't have

ETFs back then so it it just goes to show like yes there's always a narrative for everything but it doesn't mean that the price wouldn't be doing something similar without that narrative right there would just be probably another narrative that we would cling on to so going back to the stock to flow model what's really interesting is that the model from that you know that was very popular last cycle predicted sort of 100K and and it didn't quite make it there this time it's predicting much higher right a million now I don't really like being

the bad guy in these in these situations but I I have a hard time believing it's going to go to a million this cycle I could be wrong right I I certainly could be and and there's It's always important to remember that I mean there's been plenty of my models that have have been wrong but in this case right in this case if you remind yourself that the original stock to flow model that had an average price of 55k for last cycle I wonder what that one would be saying uh for this cycle but do

you guys remember in the last video when we talked about the P Cycle top and I just want to remind you really really quickly what we talked about in case you missed that video so if you look at the P Cycle top one of the things that you may notice is that every cycle the extent to which these moving out cross diminishes to the point that last cycle they barely crossed so if you take the moving averages and divide them you can see that you're getting diminishing Peaks you see that diminishing Peaks and so there's

a chance that this cycle they don't actually cross just because you you see that diminishing Peak because in order for them to cross it has to reach one where these moving averages are equal to each other but if the Peaks continue to diminish there's a good chance they don't cross because last cycle they barely got to one meaning this cycle what if they only go up to 0. n or something so what's really interesting what I like to do with all these models that are out there even the even the optimistic ones right even if

I don't think Bitcoin will go to a million this cycle that doesn't mean there's no validity to any part of the model right I mean again it's not the worst model I mean it has a pretty good I mean it looks pretty good but you know what I noticed right and and I'm sure you've noticed it too is that every cycle it tends to get a little further away so the first cycle it was way above that line right the stock to flow line then the next cycle it was above it but not as much

and then the next cycle not as much last cycle it barely got above it so what I'm suggesting is what if this cycle it just continues that pattern so what we're going to do in the same way with the P Cycle top where we took the moving averages and divided them we're going to do the same thing with stock to flow but in this case we're going to take the the the the price and and and look at it with respect to the stock to flow line so we're going to take the deflection of it

now what do you notice again diminishing Peaks what's really interesting is that if you draw a line through that Peak and that Peak and let me show you what I mean if you draw a line through this peak here and and and you know sort of roughly connect it to that one and that one we actually tagged that trend line in in March which is only more evident that it was the midcycle top back then and the market was overheated and I I said this back then right that the market was overheated and and that

we likely would get a cool off period but now we've had that cool off period and now bitcoin's back to New highs I wonder if this line is something to keep in mind along with the pie cycle top diminishing Peaks what if we go back up and tag this trend line at some point you know and and so I I just want to you know to keep that in the back of your mind that there's a chance that something like that happens um also remember there's no guarantee you tag the trend line right I mean

last cycle it tagged the trend line and then the the price of Bitcoin did go higher later but it then it tagged the trend line again so I mean that's also something to consider but I I think looking at that the deflection of the move is is a good way to to look at the market because I think a lot of people just sort of look at the model and assume that well it has to go back up to the line right it has to go up to a million and if it doesn't go to

a million I wouldn't assume that that means the model is a failure because with any model there's things you can learn just like with the P Cycle top if it doesn't trigger this cycle I mean it might still trigger right I maybe it does trigger but if it doesn't it doesn't mean the model's a failure it just means you have to dig deeper into it to try to tell to try to figure out what the model's telling you just like with the stock to flow model it doesn't mean that there's nothing there look at the

deflection and then you start to see the story for what it is right and that's why that's why last cycle you know I I feel like a lot of people were dis disappointed that Bitcoin didn't make it to 100K but the reality is the stock to flow model if you follow it I mean was doing a really good job of tracking the price of Bitcoin just because it didn't you know predict the exact Peak doesn't mean it's a it's a failure because you have to remember all models are wrong right there's not a model out

there that is going to be 100% correct despite what all the gurus will tell you there's no model that's 100% correct so you know I see what I see happen is when models don't go exactly according to plan you know all the all the people that were sort of relying on them get very very upset but you should go into it assuming that all the models you follow are going to be wrong in some way and it's not about predicting the exact way in which Bitcoin moves it's all about is the model helpful to you

and if the model is helpful to you then it's worthwhile to follow they're helpful to me because I like it looking at the models in in you know different ways right looking at the deflection of the price with respect to the stock to flow model and sort of looking at the the the Peaks and how they diminish with time and in 2013 which by the way there's been a lot of similarities between 2013 and and 2024 um but in 2013 you can actually see the second top the second Peak was actually higher than the first

peak in terms of the stock to flow model but in 2021 the second Peak was lower so it's impossible to know exactly how it's going to play out maybe it'll be the same right maybe it'll it'll go up to the same level um I don't know it's impossible to know exactly how it's going to play out but remember even with models that you might feel like are are not exactly perfect which none of them are that doesn't mean you can't find something interesting to observe so you know I I think what what plan B has

done with the stock to flow model has been great um I think it's led to a lot of people you know becoming interested in Bitcoin which is what we ultimately all want um and also you know I think that uh you know some of his predictions in late 2021 were really accurate I mean he got like the monthly close three times in a row which I thought was really fascinating so look for the good in the models right don't look for the for the one thing it didn't get right look for the things that it

it helped you with and I mean I do think last cycle the stock to flow model was really instrumental in helping to identify when Bitcoin went up right and I think I think Plan B would also agree with that in fact I know he would because he came on the channel and said just as much when we uh we interviewed him a few years ago but anyways guys we'll go on up there I'm still stuck in traffic on struggle street with being you know the sickness so we'll wrap it up there thank you guys for

tuning in subscribe give the video a thumbs up and again check out the sale on into the cryptoverse premium at intothe cryptoverse decom I'll see you guys next time bye