The price of Bitcoin (BTC) is outpacing the popular Stock-to-Flow (S2F) model, which predicts that the BTC price will eventually reach $200,000.
The S2F model forecasts the long-term price trend of Bitcoin by taking two main factors into account, namely the amount of BTC in existence (the stock) against the amount of newly mined coins entering the market (the flow).
Bitcoin is on track to $200,000 based on S2F
According to the S2F multiple, the price of Bitcoin should be hovering at around $36,851 in order for the S2F model to be on track.
Due to the recent bull cycle and Bitcoin's strong momentum, BTC/USD is now well above the S2F estimate at around $49,000.
Saifdean Ammous, renowned author of The Bitcoin Standard, emphasized that Bitcoin has rarely diverged from the S2F model since it was created well over two years ago.
The accuracy of the S2F model to date suggests that the market is recognizing the value of Bitcoin based on its scarcity and growing demand. Moreover, it highlights Bitcoin's value proposition against the depreciating U.S. dollar and the programmed reduction of the flow (i.e., Bitcoin halvings).
"PlanB released this model two years ago. Even after everything that has happened in bitcoin and the world over the last two years, the bitcoin market price has never diverged more than 1 standard deviation from the model's predicted price."
In mid-2020, PlanB said Bitcoin could tap anywhere between $100,000 to $288,000 by December 2021. He said:
“People ask if I still believe in my model. To be clear: I have no doubt whatsoever that #bitcoin S2FX is correct and #bitcoin will tap $100K-288K before Dec2021. In fact I have new data that confirms the supply shortage is real. IMO 2021 will be spectacular. Not financial advice!”
BTC is being used more than the USD M1
According to Willy Woo, a prominent on-chain analyst, Bitcoin's monetary velocity is higher than U.S. dolla M1.
This simply means that Bitcoin is moving more value than the amount used for spending with the U.S. dollar.
Such a trend indicates that Bitcoin is being actively used as a means to transfer value and a store of value simultaneously as it evolves into an established asset. Woo said:
"Bitcoin's monetary velocity is now higher than USD M1. M1 is the USD held in short term accounts for buying stuff; none of it is moving. BTC's making a joke out of it. BTC is moving more than the money we have for spending. Nevermind BTC is for long term investment."
Currently, Bitcoin is considered a store of value and a way to hedge against inflation. When the dominant cryptocurrency's adoption as a means of payment and a settlement layer rises, it will likely catalyze a second wave of mainstream adoption and use.
At that point, the value of Bitcoin could accelerate further, moving in tandem with the S2F model as the next block reward halving in about three years materializes, potentially moving BTC price further up the S2F curve.
Bitcoin could still see major corrections in price, as it did many times during the current and past bull cycles. But the S2F model will still be on track as long as BTC/USD remains within its range of short-term deviations.