What Is Stock-to-Flow?
The Stock-to-Flow (S2F) model measures scarcity by dividing the existing supply (stock) by the annual production rate (flow). A higher ratio means the asset is scarcer relative to new supply. Gold has an S2F of ~60 (it would take 60 years of mining to double the supply). After each halving, Bitcoin's S2F roughly doubles.
How Stock-to-Flow Works
The S2F model, popularized by PlanB, predicts Bitcoin's price based on its increasing scarcity after each halving event. The model maps S2F to market capitalization using a power law regression. Post-2024 halving, Bitcoin's S2F exceeds gold's, theoretically making BTC the scarcest monetary asset in existence by this metric.
Why It Matters for Traders
While S2F was remarkably accurate for Bitcoin's first three market cycles, it has faced criticism for ignoring demand-side factors, assuming supply-side scarcity alone drives price, and producing ever-increasing predictions that may disconnect from reality. It's best used as a long-term valuation floor rather than a precise price prediction model. The directional insight — halvings reduce supply growth and tend to precede price appreciation — remains valid.
