In this article, you will learn who is Plan B; the creator of the Bitcoin stock-to-flow model. Investing in cryptocurrencies is not that easy nor difficult. But predicting the volatile cryptos like Bitcoin will need the help of crypto forecasting models to make right decisions. Among those models, the stock-to-flow model is famous.
Who is Plan B: the Creator of the Bitcoin Stock-to-Flow Model?
Little is known about PlanB, one of the most revered analysts in the cryptocurrency space. Sheltering under a pseudonym he has used everywhere from social media to video interviews, the quantitative analyst has spent several years examining and forecasting Bitcoin price action.
Hailing from the Netherlands, he came to Bitcoin with a background in law and quantitative finance. In addition to his now world-renowned Stock-to-Flow Bitcoin price models, PlanB also works as an investment manager, adding that he is part of the team that handles a balance sheet worth billions of dollars.
The S2F creator has amassed a large following online after he created the methodology by which many investors speculate on the future price of Bitcoin.
What is the Stock-to-Flow Model?
The model is based on the fixed supply of Bitcoin and its predefined release schedule tied to Bitcoin halvings. According to the stock-to-flow model, the price of Bitcoin will reach close to $1 million by 2026.
The stock-to-flow model predicts value changes in a more straightforward manner. It compares an asset's current stock to the rate of new production, or how much is produced in a year. A higher ratio suggests greater scarcity, which generally leads to a higher price.
Furthermore, cryptocurrency — unlike gold and silver — cannot be converted into items or components. As a result, every crypto token represents a potential supply because investors can sell all their tokens at any time. Hence, a high stock-to-flow ratio in crypto represents relative, not absolute, value.
This relative regular inflow makes Bitcoin's stock-to-flow ratio considerably easier to anticipate, albeit it isn't always ideal — as Bitcoin matures as an asset, macro factors will increasingly influence its price.
The stock-to-flow ratio compares the existing stock (total amount available) of a commodity to the flow of new production (amount mined during a specific year).
Is Bitcoin stock-to-flow accurate for price predictions?
While the Bitcoin stock-to-flow ratio has shown some historical association with BTC price, the methodology has significant limitations when it comes to forecasting the future value fluctuations of digital assets.
Furthermore, the Bitcoin stock-to-flow model does not account for the following factors that could affect the asset's price:
Volatility: Despite the fact that Bitcoin's volatility has dropped dramatically over the years, it is still vulnerable to large price swings. Investors may panic sell their holdings after a substantial value loss during a highly volatile period, liquidating in and traders' long position significant decline in BTC price.
Black swan events: In economics, black swan events are unforeseeable occurrences that have significant consequences, particularly for the price of an asset. A black swan event for Bitcoin could be a major regulatory crackdown that effectively prohibits anyone from the currency trading. price of BTC could plummet as a result of such a hypothetical situation.
Bottom Line
Among the crypto forecasting models, the Bitcoin stock-to-flow model fits the most for the beginners but there are always exceptions. If you are interested in investing in Bitcoin, you will need to know who is Plan B: the creator of Bitcoin stock -to-flow model.
