Stock-to-Flow Model: Modeling Bitcoin's Value with Scarcity

[fillippone]

Almost two months have passed since last update and everything is behaving nicely:

Stock to Flow Cross assets:

Beautiful to see the birth of #bitcoin BTC phase5 in real time! Red dots will tun orange, yellow, green and slowly crawl towards S2FX model line (black linear line) and gold.

Stock to Flow:



Price is pretty much in line. Market price il 16,200 with a S2F_{463 days} modelling a 19,900 USD price: 23% of appreciation is well within the cointegration interval needed to keep it reliable.

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[fillippone]

Don’t get too excited for this price action, says PlanB, as the real bull run has yet to start!

Current #bitcoin BTC price action is nice, but we are waiting for a real jump (like the red arrows early 2013 and 2017). IMO that will be the start of the real bull market, and indeed phase5. January 2021?

https://twitter.com/100trillionusd/status/1330469160980242432?s=21

Stock to flow has a model price really close to current market price. From now on not only the rise is going to be quicker, but also overshoots relative to model prices are possible.

[acquafredda]

I would put PlanB's S2F into perspective by removing/mitigating data from 2011-2014: those years data were too inaccurate (exchanges faking volumes). Starting from 2016 is much better IMO and the model still works perfectly. My question is when the red dot will explode, because it will, where will it push the price? Will there be enough buyers to sustain the model? These are my thoughts recently.

[fillippone]

I would put PlanB's S2F into perspective by removing/mitigating data from 2011-2014: those years data were too inaccurate (exchanges faking volumes). Starting from 2016 is much better IMO and the model still works perfectly. My question is when the red dot will explode, because it will, where will it push the price? Will there be enough buyers to sustain the model? These are my thoughts recently.

There's no need to remove those points.
Even taking into account earlier points, even before first halving, S2F models has quite a decent forecasting accuracy.
This means probably, yes, exchanges were faking volumes, but price wasn't altered on a statistical meaningful way.
Regarding the maximum price possible once the "red dot bull run" starts, well just look at the past: in 2017 market peaked at 3 times the "slower" stock to flow model price, and has rarely been above that threshold. I think I could see that as an upper "limit" to closely monitor.

[JayJuanGee]

I would put PlanB's S2F into perspective by removing/mitigating data from 2011-2014: those years data were too inaccurate (exchanges faking volumes). Starting from 2016 is much better IMO and the model still works perfectly. My question is when the red dot will explode, because it will, where will it push the price? Will there be enough buyers to sustain the model? These are my thoughts recently.

There's no need to remove those points.
Even taking into account earlier points, even before first halving, S2F models has quite a decent forecasting accuracy.
This means probably, yes, exchanges were faking volumes, but price wasn't altered on a statistical meaningful way.
Regarding the maximum price possible once the "red dot bull run" starts, well just look at the past: in 2017 market peaked at 3 times the "slower" stock to flow model price, and has rarely been above that threshold. I think I could see that as an upper "limit" to closely monitor.

I don't disagree with you fillippone, but I would frame a response a wee bit differently, even if we may well be saying some kind of similar thing.

Mine would go something like this:

"Fuck that!!!  Why would anyone want to handicap themselves or their model in terms of attempting to understanding what the fuck is going on by removing material and relevant data? If you remove data, then your model likely becomes less accurate. 

In other words, removal of material and relevant data is nearly retarded, if not full blown retarded."



In other words, Italian "used to be stallion"** you are much nicer than me.  #nohomo

**referring to a prior self-disclosure of yours. hahahahahaha

[HabBear]

If this chart is logarithmic, we need to consider that the time it takes to reach the next peak gets drawn out. People look at these charts and think we'll hit 100,000$ by next year...i think it's more like 2022 or 2023 to get to that point. If you notice the duration it took to get to each new all time high, the time period expands by 30-50% each time.

• 1.5 years to surpass $10 - 2010-20111
• 2.5 years to surpass $1,000 - 2011-2014
• 4.0 years to surpass $10,000 - 2014-2018
• HOW MANY? years to surpass $100,000 - 2018-

Based on the data it would have to be at least 4 years, which would be 2022. But given the trend that the timeline gets longer to grow 10x, we're looking at more like 6-8 years so 2024-2026 by the time that happens.

Ok smart people...where is my logic off?

Stock to Flow:



Price is pretty much in line. Market price il 16,200 with a S2F_{463 days} modelling a 19,900 USD price: 23% of appreciation is well within the cointegration interval needed to keep it reliable.

[JayJuanGee]

If this chart is logarithmic, we need to consider that the time it takes to reach the next peak gets drawn out. People look at these charts and think we'll hit 100,000$ by next year...i think it's more like 2022 or 2023 to get to that point. If you notice the duration it took to get to each new all time high, the time period expands by 30-50% each time.

• 1.5 years to surpass $10 - 2010-20111
• 2.5 years to surpass $1,000 - 2011-2014
• 4.0 years to surpass $10,000 - 2014-2018
• HOW MANY? years to surpass $100,000 - 2018-

Based on the data it would have to be at least 4 years, which would be 2022. But given the trend that the timeline gets longer to grow 10x, we're looking at more like 6-8 years so 2024-2026 by the time that happens.

Ok smart people...where is my logic off?

You seem to be randomly picking dates and price points to try to tell some kind of story that you want to tell that does not seem to be based on the actual data.

But good luck staying poor if you choose to NOT invest in BTC or inadequately invest in BTC or fail/refuse to prepare yourself in more realistic kinds of ways in terms of looking at the past numbers more realistically and fairly - rather than skewing them with a kind of seemingly self-selection story.

By the way, nothing is guaranteed in bitcoin, even PlanB's stock to flow model is giving a kind of probability set that seems to suggest pretty decent chances that we get to $100k-ish or more in this particular cycle... whether it goes straight up from here in a kind of one shot that looks like 2017 and brings us to $100k plus in the upcoming year (2021) or it perhaps follows a 2013 kind of model that has two UPpity periods and a bit of a long correction in the middle or it could follow an alternative path too..

In any event, anyone invested in BTC should be prepared financially and psychologically for a variety of scenarios, including a possibility that the next UPpity cycle drags out longer and lower than previously expected or suggested by the stock to flow model.. or the other models such as the four-year fractal or the exponential s-curve adoption based on metcalfe and networking principles..... that are somewhat accounted for in the stock to flow model, too.

[acquafredda]

JayJuanGee, there is no point replying you here as I went full retarded. My life is ruined, I am going to sell at the top and start afresh.
/s

I said the model would work either way so there was no reason for you to show-off.

[JayJuanGee]

JayJuanGee, there is no point replying you here as I went full retarded. My life is ruined, I am going to sell at the top and start afresh.
/s

I said the model would work either way so there was no reason for you to show-off.

At least you admit it.. so you are stepping in the right direction.. good luck with your sale "at the top."

I am sure that you will call the top, after it had already happened, and then say that is where you sold, blah blah blah... heard it a million times (or close to a million times).

 

[HabBear]

If this chart is logarithmic, we need to consider that the time it takes to reach the next peak gets drawn out...

• Dates....

Based on the data it would have to be at least 4 years, which would be 2022. But given the trend that the timeline gets longer to grow 10x, we're looking at more like 6-8 years so 2024-2026 by the time that happens.

Ok smart people...where is my logic off?

You seem to be randomly picking dates and price points to try to tell some kind of story that you want to tell that does not seem to be based on the actual data.

Looks like you're developing a reputation for developing arguments here. I'm just here for honest talk.

The dates I pulled are very intentional, their as precise as the dates used in the chart I included in the post. The dates I offer correspond with the price highs in that chart (the thick multi-colored line). People are talking about the next logarithmic peak happening very soon, I don't think it'll come that quickly. I think it'll take longer to get there than we've seen in the past...just based on the data.

Try not to lead with insults, and always be hodling.

[JayJuanGee]

If this chart is logarithmic, we need to consider that the time it takes to reach the next peak gets drawn out...

• Dates....

Based on the data it would have to be at least 4 years, which would be 2022. But given the trend that the timeline gets longer to grow 10x, we're looking at more like 6-8 years so 2024-2026 by the time that happens.

Ok smart people...where is my logic off?

You seem to be randomly picking dates and price points to try to tell some kind of story that you want to tell that does not seem to be based on the actual data.

Looks like you're developing a reputation for developing arguments here. I'm just here for honest talk.

What do you know, you patronizing fucktwat?

Does your kind of vague-ass purported "honest talk" ramblings make you feel MOAR better?  Lovey dovey and contributing to the bitcoin dialogue?

The dates I pulled are very intentional, their as precise as the dates used in the chart I included in the post.

Your dates are vague as fuck, and my earlier response should have already highlighted the problematic nature of the way you framed this particular matter.

The dates I offer correspond with the price highs in that chart (the thick multi-colored line).

Does someone have to hold your hand and guide you through some kind of more representative and honest presentations... look who is the argumentative fuck who fails/refuses to present honest and specific information.

People are talking about the next logarithmic peak happening very soon,

Good.  Let them talk.  There are all kinds of wrong people in this space spewing out guesses... maybe you should disclose who these supposed people are?  might be helpful, but I doubt it.. random peeps say all kinds of nonsensical shit.

I don't think it'll come that quickly.

Good look at you, the realistic contrarian.. starting to impress because you are NOT just going along with the claims of random unspecified peeps..

I am very proud of you.

I think it'll take longer to get there than we've seen in the past...just based on the data.

Get where?  Where are we trying to go?  Have you put forth a theory yet?  Last I saw was that you were asking a question about some vague dates and vague data that you set forth.  I did not know that you had a theory, too.. No wonder you were setting forth nonsense information because you were not attempting to get the facts to talk, but instead you were attempting to spout out some kind of theory that you have.  Maybe you want to explain that?  Since you like to put things out there and let them dangle.. may was well have one more vague piece of half ass theory dangling out there... would not hurt to have one more, right? What is one more lame, vague ass theory in the whole scheme of things?

Try not to lead with insults, and always be hodling.

Oh, and now you are giving advices, too.. whew.. You seem to wear many hats, especially accounting for the niceness of peeps on the interwebs.. we should all be nice to each other, right?
 Even to guys who spout out nonsense, right?  Looking good, HabBear.... Looking good.  

[acquafredda]

JayJuanGee, there is no point replying you here as I went full retarded. My life is ruined, I am going to sell at the top and start afresh.
/s

I said the model would work either way so there was no reason for you to show-off.

At least you admit it.. so you are stepping in the right direction.. good luck with your sale "at the top."

I am sure that you will call the top, after it had already happened, and then say that is where you sold, blah blah blah... heard it a million times (or close to a million times).

 

You can not be serious, come on. What part of my sarcastic reply was not clear to you? I was joking, Jay.

Don't you see that even Donald J. Trump confirms the validity of the Stock-to-Flow Model?

[Buttermellow]

<snip>

I got you buddy, No need to be serious at all times but it is a natural reaction of any members to comment about it. No one could tell actually on what you meant about your sarcastic posts but you had already defended it in your case with your replies.

Anyway, in my opinion selling bitcoin while knowing the OP's post on stock-flow model seeing bitcoin liquidity of bitcoin supply in the future will be go down. As it was already predicted and the ATH could attract more bitcoin investors and we do not know what will going to happen on what development of that bitcoin will make.

[JayJuanGee]

JayJuanGee, there is no point replying you here as I went full retarded. My life is ruined, I am going to sell at the top and start afresh.
/s

I said the model would work either way so there was no reason for you to show-off.

At least you admit it.. so you are stepping in the right direction.. good luck with your sale "at the top."

I am sure that you will call the top, after it had already happened, and then say that is where you sold, blah blah blah... heard it a million times (or close to a million times).

 

You can not be serious, come on. What part of my sarcastic reply was not clear to you? I was joking, Jay.

Don't you see that even Donald J. Trump confirms the validity of the Stock-to-Flow Model?

Must be your way of extending an olive branch, acquafredda.   

Regarding donald trump's support of stock to flow's predictive model... fuck that guy - he don't know nuttin about nuttin.. even if he may consider himself a perfect genius.

I have frequently attempted to supplement my explanation of how to explain price pressures on BTC, and surely some peeps might suggest that stock to flow is a totally comprehensive attempt to capture whatever dynamics are present to attempt to predict BTC's price direction and the pressures upon its price.  I still like to suggest that the four-year fractal model (which is merely the overlaying of previous four year patterns) and exponential s-curve adoption based on metcalfe principles and network effects also are influential to the stock to flow model in such a way that they need their own separate explanation - even though some may argue that stock to flow already captures those concepts.  I still like to present them as a threesome set of ideas... and also to say something like this: "who fucking knows what will happen, but the combination of these three BTC price prediction models give pretty decent ideas of what might happen better than any other models and better than just throwing your hands in the air or otherwise guessing."

[acquafredda]

You see it, eventually some common ground to be shared together. I will be burying the hatchet and I hope you will do that too.

After finishing the Bitcoin Standard I came to the realization that what Saifedean Ammous says about bitcoin truly supports what is going to be its deserved and inevitable success. Whatever the model, bitcoin will revolutionize the world we live in, but I agree with you that all the ones you have mentioned are certainly complementing each other.

[fillippone]

New ATH, everyone get excited about that, but really nothing we all  didn't see coming:



We are pretty much in line with Stock to Flow model.
The fun has yet to come.

[Karartma1]

Is that magic? It could be!
As of today that is the most accurate model one could have ever produced for bitcoin. We're set to reach the next stage which is $100k.
Look at the bitcoin shortage which is happening in every exchange. Corn hunger.
Unbelievable.

[JayJuanGee]

Is that magic? It could be!
As of today that is the most accurate model one could have ever produced for bitcoin. We're set to reach the next stage which is $100k.
Look at the bitcoin shortage which is happening in every exchange. Corn hunger.
Unbelievable.

I definitely agree that the stock-to-flow model seems to capture a lot of the btc price dynamics, and surely no one should be leveraging out of reliance upon strict interpretations of the suggested BTC price direction from the model, but also the model should also be able to demonstrate that leverage is not even really needed to become richie as fuck - even with relatively modest amounts invested.

Surely many of us likely recognize that some people do happen to have cash flow problems, whether it is due to youth and still building their income, or due to being in a situation in which they have never really been able to build a large disposible income or maybe other cashflow situations that they had caused upon themselves by making bad bets or using debt for consumption goods rather than investments, and because of these kinds of different people, the ones who have higher cashflows and discretionary income (and value) are going to be able to profit more from likely btc price dynamics - as long as they see the value and they take some kind of meaningful stake in bitcoin even if it is ONLY 1% of their investments.

Funny that these days there are a lot of recommendations to invest way heavier in bitcoin, and usually my top end of the investment was to invest up to 10%, but I can see the justifications for investing more and just find it ironic that so many people are so much more bullish than my historical approach.. even though I still stick with a 1% to 10% investment allocation into bitcoin as my starting recommendation, but of course peeps can customize their allocation once they become more familiar with bitcoin and even are forced to really look at their own finances to figure out how much would be reasonable and/or prudent for their BTC allocation.

[fillippone]

Another interesting fact about S2F model: while the model seldom predicted lower values for Bitcoin, than actual market price, on the upside this has been quite conservative.

Consider this following image:



The horizontal line is the level of 1 for the S2F multiple. What does it means?

• A multiple =1 means that the ratio Market Price/Model price is =1: this means that model predicts the market correctly.
• A multiple >1 means that the ratio Market Price/Model price is > 1: this means that model predicts a price below the current market price. Market is overshooting, model is cautious.
• A multiple <1 means that the ratio Market Price/Model price is < 1: this means that model predicts a price above the current market price. Market is lagging, model is optimistic.

If we consider the orange line, the one considering the more stable 463days S2F, we see that the market overshoot the model  to 28 maximum, then 14, then 3, in the various price cycles. on the downside the model have very less explosive behaviour, and the minimum level lies at 0,49.

This means that the market never fell below of 49% of the forecasted price.

If we believe the model is reliable also on the future, then 11,000 USD is never to be seen again.


EDIT: The above post got a like from PlanB on Twitter. My life is now complete!

[jubalix]

Stock-to-Flow Model:


why does that sound so click baity?