Bitcoin price has moved outside the range set by the stock-to-flow model.
This BTC pricing model usually has some variations, but remains relevant.
The stock-to-flow or reserves-versus-flow (BTC) model, one of the most optimistic indicators for predicting future cryptocurrency movements, seems to have failed in the most recent cryptocurrency market crash.
In a graph posted on Twitter by the creator of BTC stock-to-flow ratio (also abbreviated as S2F), PlanB, we can see: a downside breakout in the estimated price range that BTC is expected to have Currently. “Bounce or break, that is the question,” was the text that PlanB accompanied the image.
In response to another user’s tweet, the analyst likened this gap to a bear market moment in 2019. In March of the same year, the BTC price approached the lowest point of the range for the forecasting model and, without breaking it, it jumps again. Although the gap has occurred this time, PlanB expects the leading cryptocurrency in the market to rebound, as it did this time.
Bitcoin broke the price range of the model from stock to flow. Source: PlanB / twitter.com
As early as the beginning of this month, PlanB estimated that the second half of 2021 will be key for its model, as the market value of bitcoin will be Lowest in inventory range since January 2019.
This is not the first time in history a departure from these lineups. However, as the PlanB chart shows, most of the previous breakouts have been positive. These variations are part of one model that while they are accurately reflected in the price categories Historical BTC.
In fact, measuring these variations can provide an indication of whether an asset is undervalued or overvalued in accordance with its stock-to-flow ratio. Bitcoin Look Into data shows that on other occasions the S2F difference indicator for Bitcoin has been negative below -1. However, at this time it is at its lowest level – -1.03.
As for the upward fluctuations, the highest point of cryptocurrency revaluation was in November 2013 – an indicator of 1.9.
Variations in the inventory-to-flow model in the past have witnessed severe underestimation. Source: lookintobitcoin.com.
The market is more complex than just issuing bitcoins.
As CriptoNoticias reported at the end of June last year, bitcoin problems returning to April and May levels have shaken the confidence of the bitcoin enthusiast community in the model used by PlanB.
Stock-to-flow ratio is not a typical metric in the cryptocurrency world, but inherited from traditional asset supply-based markets. Generally speaking, in the case of BTC, bases its predictions on the new bitcoin release cycle. And one of the key points is the top-down nature of bitcoin creation, thanks to a mechanism for reducing the reward of miners, called halving.
So far, the model created in 2019 seems to be correct, going through market cycles from when bitcoin started trading on the market until today. According to this model, cryptocurrency it is currently expected to cost more than $ 80,000.
As one Twitter user pointed out, fluctuations in S2F prices due to valuation are part of the market price, responding to many more factors than the huge supply of an asset. Among them are many external ones, such as the pandemic, the persecution of minors in China, or Elon Musk’s attacks on Bitcoin’s environmental impact.
“[Esa reflexión es un] key point that many do not understand (and will never understand). Covid, China, Elon – these are all emissions, and that’s okay. The model tries to capture the general trend using several key variables. The art of sculpting is to find balance and keep it as easy as possible.
After losing $ 30,000 support on Tuesday, Bitcoin has managed to pull together again. According to CoinMarketCap, at the time of writing, the leading cryptocurrency is listed on the stock exchange at over $ 31,600.