The Stock-to-Flow Model: How Scarcity Models Predict Bitcoin and Commodity Prices

Stock-to-Flow Ratios Across Assets

The S2F model ranks assets by their scarcity. Gold has an S2F of approximately 60: above-ground gold stocks are roughly 205,000 tons, and annual mining production is approximately 3,400 tons. At current production rates, it would take 60 years to double the above-ground gold stock. Silver has an S2F of approximately 22: above-ground silver stocks are roughly 570,000 tons, and annual production is approximately 26,000 tons. Bitcoin had an S2F of approximately 25 in 2017, which increased to approximately 55 after the 2024 halving (when the block reward dropped to 3.125 BTC). The next halving (expected 2028) will push Bitcoin's S2F to approximately 110, exceeding gold. Other commodities have much lower S2F ratios: copper's S2F is approximately 0.8, oil is approximately 0.2, and agricultural products have S2F ratios below 0.1 (annual production dwarfs existing stocks). The correlation between S2F and market value across assets is the foundation of the model. Compare scarcity across different commodities →

The Bitcoin Stock-to-Flow Model

Plan B's original Bitcoin S2F model plotted Bitcoin's price against its S2F ratio over time, using monthly data from 2009 to 2019. The model showed a remarkably tight fit: an R-squared of approximately 94%, meaning the S2F ratio explained 94% of Bitcoin's price variation over that period. The model implied that after each halving (when the S2F ratio doubles), Bitcoin's price would rise by roughly 10x. The 2012 halving took S2F from 6 to 12 (model price ~$100, actual peak ~$1,100). The 2016 halving took S2F from 12 to 25 (model price ~$1,000, actual peak ~$19,000). The 2020 halving took S2F from 25 to 50 (model price ~$55,000, actual peak ~$69,000). The 2024 halving took S2F from 50 to approximately 110 (model price ~$100,000+). The model was remarkably accurate from 2009 to 2021, predicting Bitcoin's price within a narrow range for most of that period. Explore Bitcoin trading strategies →

Why the Stock-to-Flow Model Broke Down in 2022

In 2022, the Bitcoin S2F model failed spectacularly. The model predicted Bitcoin at $100,000+ by late 2021 and $200,000+ by 2022. Instead, Bitcoin fell from $69,000 in November 2021 to $16,000 in November 2022 — a 77% decline and a deviation of more than 80% below the model price. The breakdown exposed several fundamental flaws in the model. First, S2F is not an independent driver of price — it is an input that interacts with demand, adoption, and monetary conditions. Second, the model overfits historical data (2009-2019 was Bitcoin's adoption phase, not a steady-state relationship). Third, the model ignores the demand side entirely — it assumes scarcity alone determines price, but scarcity without demand has zero value. Fourth, the 2022 crypto winter (driven by Fed tightening, FTX collapse, and Terra/Luna failure) showed that Bitcoin is not digital gold in a risk-off environment — it trades as a risk asset correlated with tech stocks. Most analysts now view the S2F model as an interesting framework rather than a reliable price predictor. Learn how to identify asset bubbles and speculative excess →

How is the stock-to-flow ratio calculated?

The stock-to-flow ratio is calculated by dividing the total existing stock of an asset by its annual production. For Bitcoin: total circulating supply (currently ~19.5 million) divided by annual new issuance (~164,000 BTC per year at 3.125 BTC per block) = S2F of approximately 55. For gold: approximately 205,000 tons of above-ground stock divided by 3,400 tons of annual mining production = S2F of approximately 60. For silver: approximately 570,000 tons of above-ground stock divided by 26,000 tons of annual production = S2F of approximately 22. The formula is straightforward, but data quality varies — above-ground silver stocks, for example, are difficult to estimate because much silver is consumed in industrial applications and never recovered. The S2F ratio changes only when production rates change (halvings for Bitcoin, mine discoveries or depletion for commodities) or when the stock changes through consumption or destruction. For Bitcoin, the S2F ratio is deterministic and predictable years in advance due to the halving schedule. For commodities, the S2F ratio changes slowly and unpredictably.

Does the stock-to-flow model work for gold and silver?

The stock-to-flow model was originally applied to gold and silver by Saifedean Ammous in his 2018 book "The Bitcoin Standard," which argued that Bitcoin's fixed supply and predictable issuance made it superior to gold as a store of value. For gold and silver, the S2F model shows a correlation with price over very long periods (decades to centuries), but the predictive power at shorter time horizons is weak. Gold's S2F has remained relatively stable at 55-65 for decades, while its price has ranged from $250 to $2,400 per ounce. This suggests that factors beyond scarcity — interest rates, dollar strength, central bank policy, investor sentiment, and inflation expectations — drive short- to medium-term gold and silver prices. The S2F model is best understood as a long-term valuation framework rather than a trading tool. It answers the question "is gold expensive relative to its scarcity?" but does not tell you when the price will adjust.

What are the main criticisms of the stock-to-flow model?

The stock-to-flow model has attracted substantial criticism from economists, analysts, and quantitative researchers. The primary critique is that the model confuses correlation with causation — Bitcoin's price and S2F both increased over time because of growing adoption, not because S2F drove the price. Second, the model is prone to overfitting: with only 10 years of data and a nonlinear curve, the high R-squared is misleading. Third, the model has no behavioral or economic theory behind it — there is no established economic law that price equals a function of stock-to-flow. Fourth, the model fails in out-of-sample testing: the 2022-2023 period showed massive deviations from model predictions. Fifth, the model ignores demand entirely — scarcity is only valuable if there is demand for the scarce asset. Sixth, the model does not account for market cycles, monetary policy, regulation, or technological change. Despite these criticisms, the S2F model remains popular as a simple narrative for why scarce assets, particularly Bitcoin, may have long-term value.

How does the Bitcoin halving affect the stock-to-flow ratio?

The Bitcoin halving directly increases the stock-to-flow ratio by reducing the flow (new supply). Approximately every 4 years, the block reward (new BTC created per block) is cut in half. In 2012, the reward went from 50 to 25 BTC (S2F doubled from ~6 to ~12). In 2016, from 25 to 12.5 BTC (S2F doubled from ~12 to ~25). In 2020, from 12.5 to 6.25 BTC (S2F doubled from ~25 to ~50). In 2024, from 6.25 to 3.125 BTC (S2F increased from ~50 to ~55 — less than doubling because the existing stock is now much larger relative to the flow). By 2028, the reward will drop to 1.5625 BTC, pushing S2F to approximately 110. By 2032, S2F will reach approximately 220 — far exceeding any other asset. This predictable supply reduction is the core of the Bitcoin investment thesis: if demand remains constant or grows while new supply is cut in half every 4 years, basic economics suggests the price should rise. However, this assumes demand remains constant — if demand falls faster than supply, the price can still decline, as 2022 demonstrated.

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