Illustrative image | source: CoinBank https://coinbank.cz/portal-o-kryptomenach
With the Bitcoin halving date (approx. April 24) approaching, there are more and more speculations about how a smaller reward for miners will affect the price of Bitcoin. In this context, the unique S2F (Stock-to-Flow) model, or sometimes referred to as PlanB, is used as one possible method of predicting the price of Bitcoin. PlanB because it was popularized by X (formerly Twitter) user who uses PlanB as his nickname.
The S2F (PlanB) model builds on laws from the world of traditional finance when it adopts a methodology used especially in commodity markets, such as gold and silver markets, etc. Through the optics of this methodology, it then offers the development of the future value of bitcoin in the cryptographic market environment. The calculation methodology is essentially simple, dividing the total amount of the given commodity by its annual production. The higher the resulting ratio, the greater the scarcity indicates, which leads hand in hand to a higher price of such a commodity.
Growth to $500,000 after halving in 2024
The S2F model can be applied to Bitcoin due to its unique structure. The total supply of bitcoins that can be mined until around 2140 is only 21 million of these cryptocurrencies. In addition, basically every four years there is and will continue to be (after 210,000 blocks have been mined) a so-called halving of the reward paid for the verification of one block.
Thanks to this structure of the Bitcoin blockchain, annual production is reduced at regular intervals and thus the difference in the resulting ratio grows. At the same time, thanks to the increasing ratio between reserves and production of new BTC, the value of this cryptocurrency will increase.
A Model of Bitcoin Stock Ratio and Annual Production | source: X Network (formerly Twitter)
Model S2F as a thorn in the side of critics
There is intense debate about the plausibility of the S2F model. While in the past it has been able to represent price trends relevantly at certain time periods, this has not always been the case. The critics are most bothered by the fact that the model oversimplifies, neglects market dynamics, such as fluctuations in demand, technological progress, regulatory interventions, etc. broader economic factors and in no way accentuates the great volatility of the crypto market. For example, the co-creator of the rival cryptocurrency Ethereum, Vitalik Buterin, to the S2F model on the X networkstated:
“S2F is really not looking good right now. I know it’s rude to be snarky and stuff, but I think financial models that give people a false sense of security and predestination that the number will go up are harmful and deserve all the ridicule.”
Although this is not a unique criticism of the S2F model, with the approaching halving, the model is gaining popularity again, which received a crack especially after the market crash of 2022, which resulted in the collapse of many crypto projects and also miners. The regained popularity is attributed to S2F’s prediction that Bitcoin should even rise above $500,000 ($532,400) by the end of 2024 after the April halving.
An analysis by the world-famous Bloomberg agency also proves that this prediction may not be completely detached from reality. She published it at the end of last year (2023). analysisthat the future significant growth of bitcoin can ignite a super-bullish mood, the result of which could be a potential increase in the value of bitcoin up to the limit of 500,000 dollars (approx. 11.5 million CZK).
Bitcoin growth up to 5 million dollars
However, S2F makes an even more interesting prediction after the halving in 2028. According to PlanB, the creator of the model, after this halving, Bitcoin is expected to grow to almost $5 million (approx. $4,878,000) by the end of the year. PlanB to that on the X networkjust briefly stated:
“That’s pretty much all you need to know, plus of course a wide margin of error. By the way, bisecting 5 – bisecting 6: the average price is $5 million.”
Bitcoin value growth prediction model |source: bitbo https://charts.bitbo.io/stock-to-flow/
Whether you are a fan of the S2F model or not, it is important to conclude that financial markets are inherently unpredictable and are affected by factors other than a lack of output. The S2F model, while enticing, represents only one view of the broader market. Which he himself admits Plan B. Anyone who would like to invest in this area should first start by studying what cryptocurrencies are, why they were created and what they entail. Do your market research and never invest more than you are willing to lose.
Ing. Zbyněk Kalousek
He studied economics and management at the Masaryk University in Brno. In the past, he was engaged in the analysis of financial markets. He returns to this activity after a short pause. Co-founder of a company that deals with consulting and accredited education. He cooperates with several other companies. He perceives the world of cryptocurrencies as a progressive part of the market, which offers a lot of opportunities, but at the same time presents a lot of pitfalls, from decentralization, an apolitical approach, to high volatility of exchange rates, to the increasingly difficult mining of cryptocurrencies.
Since 2021, it has been working with MipSoftware, which operates the CoinBank cryptocurrency exchange and the CoinBank Trader cryptocurrency exchange. Both platforms are particularly interesting for Central European clientele. Through its product, it connects end users with the world’s largest crypto exchanges and offers a pleasant user experience. For a Czech client, trading using Czech currency is probably the most pleasant function. A wide range of cryptocurrencies, access to the world’s largest exchanges, these are prerequisites for interesting cooperation.
More information at https://coinbank.cz/.