In today’s post, we will discuss a popular analyst known by the pseudonymous name of PlanB. He is not only the creator of the Stock-to-flow model but also a figure that has captured the attention of the cryptocurrency community. This model aims to explain Bitcoin price movements and mechanics, making it essential for anyone new to Bitcoin and eager to learn. With over 1.9 million followers on social media and more than 151 thousand subscribers on his YouTube channel, PlanB entertains and educates with his analysis and insights on Bitcoin.
Could Bitcoin reach $228,000 or perhaps even $1 million? According to PlanB, a Dutch econometrician who prefers to keep his identity private, it’s possible. We might find it intriguing that PlanB, who occasionally appears on podcasts, has developed two models to forecast Bitcoin’s price trajectory: the stock-to-flow model and the more comprehensive S2FX model. These models have garnered widespread attention and are considered by many as a cornerstone for understanding Bitcoin’s potential future value.
Understanding Bitcoin’s Value Through Scarcity
Scarcity plays a critical role in determining value. This concept isn’t new—think of the presumed toilet paper shortages at the start of the COVID-19 pandemic. When something is hard to obtain, whether due to production difficulties or high demand relative to supply, it becomes valuable. Gold exemplifies this principle well. It is costly and labor-intensive to mine and highly valued as an investment, in industry, and in jewelry. Gold’s impossibility to replicate adds to its value, despite the existence of imitations which experts can easily identify. You might appreciate that Bitcoin mimics these properties digitally, setting it apart from other digital assets like MP3 files, which can be easily copied. Bitcoin’s incorruptibility and the rigorous verification process on the blockchain ensure every unit’s value.
Explaining the Stock to Flow Model
The stock-to-flow ratio (S2F) is a measure used by PlanB, defined as the current stock of a commodity divided by its annual production rate. For example, it currently takes about 58 years to double the supply of gold due to its rarity. Bitcoin is catching up, with 19.7 million bitcoins in circulation as of May 2024 and an annual production of 328,500 bitcoins, giving it an S2F of 55. This places it on a similar scale to gold in terms of rarity and potential value increase.
Bitcoin Halvings Impact on S2F
Bitcoin undergoes a phenomenon known as halving every four years, where the number of new bitcoins entering circulation is cut in half. This event effectively doubles the S2F ratio, leading to potential price increases if demand remains steady. PlanB’s hypothesis, explored through his stock-to-flow model, suggests that higher S2F ratios could drive higher prices.
PlanB’s S2FX Model and Bitcoin’s Evolution
PlanB introduced the S2FX model in April 2020, building on the original S2F model. This new model sets even higher expectations for Bitcoin’s price, reflecting its evolution through different phases:
- Concept Phase (1) – Initially, Bitcoin was a novel idea proposed by Satoshi Nakamoto and used by a small group of enthusiasts.
- Payment Method Phase (2) – Bitcoin began to be seen as a viable payment method as its value reached parity with the US dollar.
- E-Gold Phase (2) – After the first halving, Bitcoin was valued similarly to an ounce of gold and started to be recognized as digital gold by mainstream media.
- Financial Asset Phase (3) – Post-second halving, Bitcoin gained serious consideration as a financial asset, with over a billion dollars in daily transactions not uncommon.
The Future and Comparisons to Gold and Silver
As Bitcoin moves into what PlanB terms “phase five,” its future remains uncertain, though comparisons to silver and gold suggest significant potential. Silver has a stock-to-flow ratio of 33 with a total market value of $561 billion, while gold’s ratio of 58 corresponds to a market value of approximately $10 trillion. If Bitcoin follows these metals, its limited supply of 21 million units could drive its individual value even higher than gold’s.
While PlanB’s models provide a positive outlook for Bitcoin, reaching as high as $288,000 and beyond, unforeseen events can still affect its trajectory. As a final disclaimer, we should always conduct our own research and invest wisely.
A detailed description of PlanB’s models can be found on his Medium page.
For more information, you can find PlanB on X @100trillionUSD. His YouTube channel is called @planb_bitcoin.