A researcher debunks Stock-to-Flow model, likens Bitcoin to a 'tech stock'

"There are many reasons why the price of Bitcoin can rise or fall, but S2F is not one of them", contends report author.

A report authored by the research team of ByteTree purports to debunk one of the most popular Bitcoin valuation models - Stock-to-Flow.

The model provides a very optimistic forecast for Bitcoin, claiming that a year from now we should see price levels above $100,000.

The stock-to-flow models have been applied for decades to forecast the price of commodities like gold and silver.

Stock is the existing supply of the asset and flow is the additional new supply that is being generated.

Applied to Bitcoin, it hinges on the fact that its inflation or flow will be getting progressively smaller, while the stock-to-flow ratio will be getting progressively higher.

Since Bitcoin's supply is fixed, it is left to the demand side of the equation to determine the price, he concludes.

"When the network has a large stock and a relatively small flow, it is the stock that matters. As the flow diminishes, it becomes less important in influencing market prices."

"I would argue that Bitcoin represents a powerful digital network that is thriving. It is a sort of technology stock without profits or a CEO, but with high security, growing distribution and application. There are many reasons why the price of Bitcoin can rise or fall, but S2F is not one of them."

It's worth noting that the price has lagged behind the level forecast by the model in the months since Bitcoin's third block halving.