Beyond the Hype: How Stock-to-Flow Actually Works for Bitcoin Investors

Bitcoin has come a long way since 2009—from a niche digital experiment to a $69,000+ asset during the November 2021 bull run. But here’s the thing: predicting where it goes next remains a puzzle that keeps investors up at night. The Stock-to-Flow (S2F) model emerged as one of the most talked-about tools to crack this code, promising insights based on scarcity. Let’s break down what this model actually does, why some swear by it, and why others dismiss it entirely.

Understanding Stock-to-Flow: The Basic Mechanics

Before diving into Bitcoin specifics, let’s demystify the concept. Stock-to-Flow measures how scarce something is by comparing what’s already available versus what’s being produced. Think of it like this:

• Stock = Total accumulated supply (for Bitcoin, all coins ever mined)
• Flow = Annual production rate (new coins created yearly)

Divide stock by flow, and you get the S2F ratio. A higher number suggests scarcity, and scarcity theoretically drives value—the same principle that makes gold valuable.

For Bitcoin, this scarcity story is baked into its DNA: a hard cap of 21 million coins ensures it can never be inflated like traditional currencies. Every four years, the mining reward halves during what’s known as Bitcoin halving events, further reducing the flow of new coins. This mechanism creates a predictable scarcity timeline that the S2F model attempts to capitalize on.

Why the Model Gained Traction: The Historical Pattern

PlanB, the model’s creator, popularized S2F by showing a striking historical correlation: Bitcoin’s price movements, especially after halving events, seemed to dance along the S2F curve. When Bitcoin halving occurred and the mining reward cut by half, fewer new coins entered circulation. According to the model’s logic, this should drive up prices.

For years, this played out. The model predicted:

• Significant price surges following halving events
• A trajectory toward $55,000 around the 2024 halving
• Potential prices reaching $1 million by 2025

Long-term investors loved this narrative because it provided a mathematical foundation for their conviction. It wasn’t about gut feeling—it was based on scarcity, a concept proven in precious metals markets.

The Critical Debate: Where S2F Gets Questioned

Not everyone’s convinced. Ethereum co-founder Vitalik Buterin famously called the S2F model “not looking good” and labeled it “harmful” for oversimplifying market dynamics. Other notable voices have weighed in:

Adam Back (Blockstream CEO) sees merit in S2F as a back-tested model, reasoning that reduced Bitcoin supply from halving could logically boost prices through increased scarcity.

Cory Klippsten (Swan Bitcoin founder) worries the model confuses retail investors rather than guides them.

Alex Krüger, a respected crypto trader and economist, dismisses the S2F approach as “nonsensical” for predicting future prices.

Nico Cordeiro (Strix Leviathan CIO) challenges the model’s core assumption: that scarcity is Bitcoin’s primary value driver. What about adoption, market demand, or economic conditions?

The bottom line: the debate isn’t whether the model has worked before—it has shown correlation with Bitcoin’s price in certain periods. The question is whether it will keep working, and whether scarcity alone explains Bitcoin’s valuation.

What the Model Misses: The Real-World Complexity

Here’s where Bitcoin diverges from gold. Bitcoin isn’t just a store of value sitting in a vault. It’s evolving:

Technological upgrades like the Lightning Network expand its utility beyond being digital gold, making it a potential payment rail. Innovations in Bitcoin’s ecosystem could drive demand independently of scarcity.

Regulatory landscape shifts dramatically across regions. Favorable regulations boost adoption; strict rules can tank demand. The S2F model doesn’t account for this volatility.

Market sentiment swings wildly based on media narratives, geopolitical events, or macro economic tremors. These emotional factors often override mathematical models in cryptocurrency markets.

Competition from altcoins with superior technology or use cases can erode Bitcoin’s dominance, affecting investor demand regardless of its scarcity.

Economic cycles matter too. During financial crises, investors might flee risky assets entirely, pushing Bitcoin down despite its scarcity increase.

The S2F model treats Bitcoin like an inert commodity. In reality, it’s a living network constantly evolving, with network effects and adoption curves playing massive roles.

Practical Reality: The Model’s Hit-and-Miss Record

The model predicted substantial price increases following Bitcoin halving events, and sometimes it delivered. But sometimes it didn’t.

In the last cycle, S2F predicted Bitcoin could touch $100,000 or beyond. It didn’t. The model has been more accurate around identifying the general direction of price increases post-halving than pinpointing exact price targets. This precision gap matters enormously for traders but matters less for buy-and-hold investors thinking in years rather than months.

Short-term traders should avoid relying on S2F—it’s simply not designed for that timeframe. Daily volatility and market noise overwhelm the scarcity signal. Long-term investors, however, might find value in it as one piece of a broader conviction, especially if they believe Bitcoin’s value thesis fundamentally rests on digital scarcity.

Using S2F Without Getting Burned: A Practical Framework

If you’re considering S2F in your investment decision-making, here’s how to avoid common pitfalls:

Don’t make it your only lens. Combine S2F with technical analysis (chart patterns, support/resistance levels), fundamental analysis (adoption metrics, network health), and sentiment analysis (what are investors actually feeling?). This multi-angle approach covers more variables.

Understand the time horizon mismatch. S2F works better for understanding long-term trends—think years, not quarters. If you’re planning to hold Bitcoin for 5+ years, the scarcity narrative may be relevant. If you’re trading the next pump, ignore this model entirely.

Watch external factors relentlessly. Regulatory news, macro economic shifts, Bitcoin technology upgrades, and major adoption milestones can all override the S2F signal. Stay plugged into what’s actually happening in the world and in the Bitcoin ecosystem.

Set clear risk rules. Use stop-loss orders. Size your Bitcoin position appropriately relative to your portfolio. The S2F model, like any predictive tool, carries uncertainty. Don’t bet your financial security on it.

Adjust your strategy as reality shifts. The crypto market moves fast. If the S2F model’s predictions consistently diverge from actual price action, be willing to reassess your reliance on it.

The Accuracy Question: Honest Assessment

Let’s be clear: the S2F model has shown correlation with Bitcoin’s price movements, particularly around halving events. But correlation isn’t causation, and past performance doesn’t guarantee future results.

The model’s biggest weakness is its oversimplification. It reduces Bitcoin’s valuation to a single variable—scarcity—while ignoring dozens of other factors that clearly influence price. In a complex system like a global asset market, single-variable models rarely hold up over extended periods.

That said, dismissing it entirely would be equally wrong. The scarcity principle has real merit. Bitcoin’s fixed supply is a genuine differentiator, and as institutional adoption increases and scarcity becomes more apparent, this factor might gain importance over time.

The honest take: S2F is a useful framework for thinking about Bitcoin’s long-term trajectory, not a crystal ball. Use it as part of your analysis toolkit, not your entire investment thesis.

Looking Ahead: What Changes the Equation?

Future Bitcoin halvings will continue reducing the flow of new coins, theoretically strengthening the scarcity argument. But several wildcards could alter this narrative:

• Adoption acceleration could outpace scarcity’s influence, driving prices up for utilitarian reasons rather than rarity
• Macro economic instability might make Bitcoin an appealing hedge, independent of S2F dynamics
• Technological breakthroughs in Bitcoin’s layer-2 solutions or security features could unlock new use cases
• Regulatory clarity in major markets could either boost or crush demand significantly

The future of Bitcoin Stock-to-Flow model’s relevance depends on whether scarcity remains Bitcoin’s primary value driver or whether these other factors become equally or more important.

Final Take

The Stock-to-Flow model offers a valuable lens for thinking about Bitcoin’s value through the scarcity principle. It’s not wrong—it’s just incomplete. The most sophisticated investors treat S2F as one input among many, not as gospel. Bitcoin’s price will ultimately be determined by a complex interplay of scarcity, adoption, regulation, technology, and market sentiment.

If you’re holding Bitcoin long-term and believe in digital scarcity as a fundamental value driver, S2F can reinforce your conviction. If you’re trying to time trades or predict exact price targets, look elsewhere. And if you’re new to Bitcoin, use S2F as a learning tool to understand scarcity’s role—but don’t let it be the only reason you invest.

The model remains relevant because the underlying scarcity principle is real. Whether that scarcity will be Bitcoin’s primary value driver in 2030, 2035, or beyond remains one of crypto’s biggest open questions.