Bitcoin Currently Overvalued By Stock-To-Flow Standards

Bitcoin Currently Overvalued By Stock-To-Flow Standards

According to Plan B’s now famous stock-to-flow model, the price of Bitcoin can be expected to reach prices of $100,000 to $1 million per coin eventually. The theory is based on the cryptocurrency’s scarce supply.

However, looking at the Bitcoin daily stock-to-flow chart, the crypto asset is currently overvalued compared to past cycles. Here’s what this could mean – both bullish and bearish – for the leading cryptocurrency by market cap based on this hypothetical comparison.

Bitcoin Overvalued According Stock-To-Flow Model Comparison With Past Cycle

Bitcoin has recently come into favor and fame, primarily due to the cryptocurrency’s hard capped, 21 million BTC supply. With even less in circulation, and millions more suspected to be lost or locked away forever, it is potentially the hardest form of money ever known.

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Comparisons with gold – another asset with a limited supply – has benefited the cryptocurrency, which has been pitched as the digital version the precious metal.

Certain models have been created to attempt to affix a valuation to gold based on its scarcity, and such a model was in the past adapted to Bitcoin by a pseudonymous analyst named Plan B.

The stock-to-flow model has been widely cited from CNBC anchors to other crypto analysts and is among the most sworn by standards in the cryptocurrency community. The model projects each BTC to eventually be worth $100,000 to $1 million and more per coin, and price action has historically traced along perfectly.

Bitcoin Currently Overvalued By Stock-To-Flow StandardsBitcoin is above the median of the stock-to-flow model, compared to the last bull market | Source: Plan B on Twitter

Forget The Noise, Buy BTC And Hold For The Long Haul

“Like clockwork” the model continues to work, albeit for one difference visually between this cycle and the last. Bitcoin is currently above the median on the stock-to-flow model, suggesting it is currently overvalued compared to the last cycle.

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All instances where price action deviated above the median – dating back to 2011 and most recently with the 2019 peak – have resulted in a steep correction back below it.

This could mean one of two things: The current cycle is far more bullish than in 2017 and is approaching the final wave of the current uptrend before correcting, or, a correction is coming sooner than later before the uptrend resumes to $100,000 per coin and more.

In the end, does it really matter the price per coin currently, or when the cryptocurrency corrects? With Bitcoin tracing along the stock-to-flow model “like clockwork” again and again, and only deviating above it, not below it, buying at any time and holding it long enough will yield results regardless.


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