News regarding Bitcoin and cryptocurrencies is in constant turmoil. It can happen that important information gets lost in the daily news flow and you miss important points.
This format is there to remedy that. We come back to the news of the past week in the Crypto Weekly to keep you informed on the current situation of cryptocurrencies.
For this week’s unmissable, we’re going to ask ourselves if Bitcoin could hit $ 55,000 in 2021? This is what Fanis Michalakis sought to elucidate in his article based on the Stock-to-Flow model.
Le ratio Stock-to-Flow
Let’s first take the time to discuss Stock-to-Flow and what it represents. This ratio , which quite simply corresponds to the division of the existing stock of a good by the quantity of this good newly created each year, is notably introduced by Saifedean Ammous very early in his work „The Bitcoin Standard“ , where he addresses the question of money and its forms.
The stock-to-flow , it is understood, is to some extent the scarcity of goods . It expresses how many years it would take, with current production, to double the existing stock of the commodity in question. Gold, for example, with a stock of around 185,000 tonnes and an annual production of 3,000 tonnes, has a Stock-to-Flow of 62 (this data is from the paper published by PlanB).
Stock-to-flow selon PlanB
We know: Bitcoin is not just a “technology” . It is perhaps above all an economic, monetary and social proposition. This proposal is due in particular to the final limited quantity of tokens, since there will never be more than 21 million bitcoins in circulation, with a regular reduction in monetary issuance, which creates a certain notion of scarcity . Hence the idea of bitcoiner PlanB to study the relationship between the scarcity of Bitcoin , measured by its Stock-to-Flow , and its market value .
This is precisely the exercise that PlanB undertook to test its hypothesis. It has indeed collected the data, directly on the blockchain, allowing it to calculate for each month the value of Bitcoin’s Stock-to-Flow since its creation, by going to find, for each period, the number of blocks found (and therefore the number of new bitcoins mined) as well as the quantity of coins in circulation. It then only had to compare the ratio thus calculated with the average price of bitcoin for each month . He thus obtains the following graph with, on the x-axis, the Stock-to-Flow ratioand, on the y-axis, the total market value of bitcoin (i.e. how much are all bitcoins in circulation worth). Note also that the axes are graduated on a logarithmic scale (in other words, there is as much space between 1 and 10 as between 10 and 100, and so on).
Do not hesitate to consult the entire article to know whether or not Bitcoin will wait for $ 55,000: Bitcoin at $ 55,000 in 2021, a math story? The inconstancies of the Stock-to-Flow model