Understanding Bitcoin's Stock-to-Flow Model: Can PlanB's Formula Really Predict BTC's Price?

Imagine having a roadmap that tells you when Bitcoin will hit its next milestone. While no crystal ball exists for crypto traders, the stock-to-flow model has become one of the most discussed frameworks in the space since PlanB introduced it in 2019. Whether you’re skeptical or bullish on this approach, it’s hard to ignore how frequently traders reference it when deciding their BTC positions.

Breaking Down the Stock-to-Flow Concept

The stock-to-flow (S2F) model operates on a deceptively simple premise: Bitcoin’s price can be projected by analyzing its supply scarcity. Here’s how it works—stock represents the total Bitcoin currently in circulation, while flow represents how much new BTC enters the market over a specific period.

PlanB’s insight was elegant: since Bitcoin mimics precious metals’ scarcity characteristics, why not apply the same valuation method used in commodity markets? By dividing current supply by expected production rate, traders get an S2F ratio that theoretically correlates with Bitcoin’s price potential.

The beauty lies in Bitcoin’s predictability. Every four years, the network undergoes a halving event that cuts mining rewards in half, creating a predictable supply shock. This mechanical scarcity mechanism means Bitcoin’s S2F ratio continuously increases over time—and according to the model, so should its price.

Reading the S2F Chart: What the Colors Really Mean

The Bitcoin stock-to-flow chart visualizes this relationship through a color-coded system. You’ll typically see BTC’s actual market price plotted against the S2F’s projected price range. The color gradient reflects proximity to the next halving: cooler shades (blue, purple) indicate imminent halving events, while warmer tones (red, orange) show periods further from the next event.

The variance metric—the gap between predicted and actual price—tells traders whether BTC is trading above or below the model’s expectations. Many traders use this deviation pattern across Bitcoin’s history to spot potential entry or exit opportunities.

Why S2F Gained Momentum Among Traders

The model’s popularity stems from several legitimate strengths. First, it’s remarkably accessible—PlanB distilled a complex concept into an easily scannable visualization that doesn’t require advanced mathematics to grasp. This simplicity democratized price forecasting beyond institutional analysts.

Second, the model grounds itself in Bitcoin’s fundamental tokenomics rather than subjective speculation. By anchoring predictions to the fixed supply schedule and measurable scarcity metrics, it avoids the trap of wishful thinking that plagues many crypto theories.

Third, the track record isn’t dismissible. Since 2019, while S2F projections haven’t been perfectly accurate, the model rarely posts variance above one order of magnitude. More importantly, its core thesis—that Bitcoin’s long-term price trends upward due to increasing scarcity—has largely held true across multiple market cycles.

The Real Limitations Nobody Should Ignore

However, treating S2F as gospel ignores critical blindspots. The model operates in an oversimplified bubble where only tokenomics matters, yet Bitcoin’s actual price responds to countless other variables. Market sentiment shifts, network upgrades like SegWit, technological innovations like the Lightning Network, and sudden regulatory announcements can all override what S2F predicts.

The framework also assumes Bitcoin will forever function as “digital gold”—a premise not universally accepted. Some argue Bitcoin’s peer-to-peer payment potential or reserve currency applications deserve equal weight in valuation models.

Perhaps most damaging for traders: S2F can’t process black swan events. When unprecedented crises hit markets—whether geopolitical shocks or financial contagion—historical patterns become useless. The model assumes demand continuity, but reality doesn’t work that way.

Day traders and swing traders should especially note that S2F is a long-term tool. Its insights on halving-driven price cycles don’t help with intraday volatility or week-to-week positioning. For short-term strategies, technical indicators and chart patterns remain more relevant.

How Professional Traders Actually Use This Model

Successful traders don’t rely on S2F in isolation. Instead, they layer it with complementary analysis. Technical chart patterns, macroeconomic data, and on-chain metrics create a more complete picture of Bitcoin’s price drivers.

Think of stock-to-flow as one lens among many. It excels at revealing Bitcoin’s long-term structural trajectory—particularly around halving cycles—but fails at capturing the granular factors that move prices day-to-day. The most effective approach combines S2F’s long-term framework with other tools for a holistic trading strategy.

The Current Context: Bitcoin at $95.62K

With Bitcoin currently trading near $95.62K and commanding a $1.91 trillion market capitalization, market participants continue referencing the stock-to-flow model to contextualize whether BTC is overvalued or undervalued relative to its scarcity metrics. Regardless of which camp you’re in, understanding how this framework functions—and where it falls short—remains essential for anyone serious about developing a sustainable crypto strategy.