Using Bitcoin Stock-to-Flow to Estimate Price and Its Limits

Summary

This article applies the stock-to-flow ratio to Bitcoin as a scarcity-based valuation approach. It defines stock as the existing supply and flow as new annual issuance, then estimates Bitcoin’s annual production from the change in supply over a year. Using historical price and supply series, the author takes logarithms and fits a linear regression, producing a power-law relationship between the ratio and price. The article reports an R-squared near 93% for its fitted sample and uses the resulting equation to project a future valuation, including a date when the model suggested Bitcoin could reach $100,000.

The article relates issuance changes to Bitcoin’s halving schedule and compares the scarcity measure with precious metals. It notes that model deviations grow during sharp price moves and says the assumptions and possible cointegration should be reassessed. The reported fit is historical and does not establish that scarcity causes prices or that the relationship will persist. The forecast is time-bound to the article’s context, and the author presents it as an uncertain valuation estimate rather than financial advice.

Key ideas

• Stock-to-flow compares an asset’s existing supply with its annual new production.
• The article estimates Bitcoin’s annual issuance from year-over-year supply changes and relates the ratio to price using log-linear regression.
• The fitted model reports an R-squared near 93% for the historical sample discussed.
• Price deviations from model estimates may widen during sharp market moves, according to the article.
• The author stresses that the model depends on assumptions and that its relationship with price may not persist.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.