Backtesting Bitcoin’s Stock-to-Flow Model Confirms 2020 Rally

The end of the year is usually a good time to review some price predictions for bitcoin. One model that has grown in popularity this year has been stock to flow and further research indicates that BTC price patterns are accurate.


Bitcoin S2F In Depth

The model was originally proposed by market analyst ‘PlanB’ who modeled bitcoin price through scarcity earlier this year.

Stock to Flow has been described as a ration of the amount of a commodity held in inventories, or current circulation divided by the amount produced annually. It has been increasingly used for BTC price predictions as the halving in May will cut the supply and inflation in half which doubles the S2F ratio.

Dutch Linux administrator Rob Wolfram has expanded on the research delving deeper into stock to flow and future movements of bitcoin price.

The researcher noted that values of extrapolation into the future of today are likely different from next month’s values so testing older values may be more accurate.

The previous two halving events in 2012 and 2016 caused a steep increase in stock to flow ratio in the year that followed. Wolfram has taken these two data subsets to predict a future one rather than using current data.

A comparison of logarithmic values has been overlaid onto the historical bitcoin price chart to anticipate future movements and the charts line up remarkably well. He also extracted the million or so ‘ghost coins’ ostensibly held by Satoshi himself.

Bitcoin price predictions are largely on track with those suggested by ‘PlanB’ in his original analysts back in May.

“It seems that the periods when the stock to flow ratio is rising significantly give the best prediction of the future value. I look forward to seeing the effect of the next halving event in May 2020.”

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