According to the ByteTree crypto analysis company, the well-known Stock-to-Flow (S2F) model is not reliable for predicting future Bitcoin movements.
According to ByteTree’s co-founder and CIO, Charlie Morris, the Stock-to-Flow (S2F) model is wrong. S2F is a popular theory developed by PlanB analyst, according to which Bitcoin’s limited offer is the key feature that will bring its price above $100,000 as early as 2021.
However, as Morris explained during an interview with Cointelegraph, a progressive compression of the new supply will not be enough to cause Bitcoin’s appreciation. In his opinion, the Stock-to-Flow does not take into account the decreasing importance that the Flow (additional offer) will have with respect to the Stock (total outstanding offer) on the Bitcoin price.
Although it is true that BTC’s supply will decrease more and more, people will still be able to sell their Bitcoins, thus satisfying market demand.
To clarify his point of view, Morris has introduced a parallelism with other scarce goods, such as gold:
„Nobody thinks that if we stopped mining gold, then its price would rise infinitely. That is not how it works“.
The fundamental driver of the Bitcoin price, according to Morris, is the level of activity on the network. In other words, it will be an increasing number of Bitcoin hand-overs that will drag it to new maximum levels:
„The amount of money that moves across the network […] and the price of Bitcoin are highly correlated, and always have been.“
Moreover, as Bitcoin matures as an asset, its price will be influenced by macro factors such as inflation, bond yields and dollar performance.