Table of Contents
Investing is easier when you have tools that break things down into simple pieces. Nobody wants to put money into something they don’t understand. That’s why tools like the Bitcoin Stock-to-Flow model became so widely discussed in the first place.
The supply of Bitcoin follows a fixed schedule, and the Stock-to-Flow model builds on that schedule to make Bitcoin’s scarcity easier to understand.
When Bitcoin was trading around $7,000 in 2020, many investors used this model to explain why long-term price expectations were rising. Bitcoin didn’t follow every prediction, but it later climbed to around $69,000 in 2021, which brought even more attention to the model.
So what exactly is the Stock-to-Flow model, and how does it work? Let’s break it down.
What Does Stock-to-Flow Mean?
Stock-to-Flow is simply a way to measure how scarce something is.
Think of gold: there’s already a lot in the world (the stock), but only a little is mined each year (the flow). That scarcity, how hard it is to get more, is what gives gold its value.
Bitcoin works the same way because its supply is fixed and predictable. We know how many bitcoins exist now, and we know exactly how many new coins will be created each year. The Stock-to-Flow model simply compares these two numbers to show how limited Bitcoin is, which helps to explain why it can be valuable.
Who Created the Bitcoin S2F Model?
The Bitcoin Stock-to-Flow model was popularized by a crypto analyst known as PlanB.
PlanB took a concept commonly used for precious metals and applied it to Bitcoin. The idea became popular because it helped people understand how Bitcoin’s fixed supply might influence its price over time, especially during halving events, when fewer new bitcoins are created every four years.
In 2019, PlanB shared a model that linked Bitcoin’s stock-to-flow ratio with its long-term price movements. The goal wasn’t to predict daily prices, but to show how increasing scarcity over time could affect value.
How Bitcoin S2F Works
1. Stock
The total number of bitcoins that have already been mined. At the time of writing this article, there are about 19 million BTC in circulation.
2. Flow
The number of new bitcoins added to circulation each year through mining. Today, that’s around 328,500 coins per year.
3. How it Works
The Stock-to-Flow model divides the stock by the flow to see how scarce Bitcoin is, and the result is something called the Stock-to-Flow ratio. The bigger the number, the harder it is to get new coins, and the rarer the asset becomes. This is why gold, for example, is scarcer than copper.
Let’s put the numbers in for a clearer illustration:
Current stock = 19,000,000
Flow = 328,500
Stock-to-Flow ratio = 19,000,000 ÷ 328,500 ≈ 57.8
This means the existing supply of Bitcoin is about 58 times larger than the new coins being added each year.
Here’s the interesting part: every four years, a Bitcoin halving event occurs, where miners earn half as many new bitcoins. This cuts the flow in half, which doubles the Stock-to-Flow ratio:
So, Stock-to-Flow ratio after halving will be = 19,000,000 ÷ 164,250 ≈ 115.7
Over time, Bitcoin becomes progressively scarcer, which is exactly what the Stock-to-Flow model is designed to show.
How Beginners Should Use Bitcoin S2F
Bitcoin S2F is like a guide to understanding scarcity. Here’s how beginners can make sense of it:
1. Watch long-term trends, not daily prices
The Stock-to-Flow model is all about seeing Bitcoin’s scarcity over the long run, especially during halving events when new coins become harder to mine. It’s not meant to predict every jump or dip in the price; Bitcoin can swing up and down for all sorts of short-term reasons that don’t really matter to the bigger picture.
If you’re a beginner, take a step back and look at the long-term trends. Look at Bitcoin’s Stock-to-Flow ratio as a way to understand scarcity and value over time, not as a tool to stress about daily price moves.
2. Compare the current price to the S2F ratio
Investors sometimes look at the Stock-to-Flow ratio to see if Bitcoin is either overvalued or undervalued in relation to its scarcity.
For example, let’s say the Stock-to-Flow ratio suggests that Bitcoin’s scarcity could support a price of $60,000, but the market price today is $50,000. Some investors might see that as a potential opportunity to buy, because Bitcoin is cheaper than what its scarcity might suggest.
On the other hand, if the market price is much higher than what the ratio suggests, some people may choose to wait or be more cautious, because Bitcoin might be overvalued relative to its scarcity.
The key takeaway for beginners is that if applied well, the ratio can help you spot moments when Bitcoin might be undervalued or overvalued in the long term. It works the same way you check the weather before going outside; it won’t tell you exactly when it will rain, but it helps you plan smarter.
3. Use it alongside other tools
Stock-to-Flow is helpful, but it doesn’t account for everything like demand, regulations, or global events. Beginners shouldn’t rely on S2F alone. Instead, combine it with other research.
You can:
- Check market trends: Look at how Bitcoin has been moving over weeks or months.
- Follow the news: Major announcements, regulations, or adoption stories that can influence price.
- Learn basic investment principles: Think about risk management, diversification, and how much of your money you’re comfortable putting in.
By using Stock-to-Flow as one tool among many others, you get a more complete picture of the market.
Frequently Asked Questions (FAQs) About Bitcoin Stock-to-Flow Model
1. Is the Stock-to-Flow model always reliable?
No, it isn’t always reliable. It has aligned with Bitcoin’s price during some cycles in the past, but it can miss or diverge significantly, especially because it doesn’t include demand, regulation, or macro events.
2. Can S2F predict Bitcoin crashes?
No, the Stock-to-Flow model cannot predict crashes. It is designed to show Bitcoin’s long-term scarcity, not short-term market swings. Prices can fall for many reasons, like news, regulations, or big investors selling, and S2F doesn’t account for these.
3. Can I use S2F to decide when to buy or sell?
Yes, you can, but use it carefully. The Stock-to-Flow ratio can give hints if Bitcoin is overvalued or undervalued, which might help guide buying or selling decisions. However, it’s not a standalone signal; so, always consider your investment goals, risk tolerance, and other market factors before acting.
4. Does S2F work for other cryptocurrencies?
No, it does not. The Stock-to-Flow model works best for assets with a fixed and predictable supply, like Bitcoin. Most other cryptocurrencies don’t have this kind of schedule, so S2F isn’t as reliable for them.
Conclusion
The Bitcoin Stock-to-Flow model is simple and deeply tied to how Bitcoin’s supply mechanics work, but it’s not a standalone price predictor. The smartest beginners treat S2F as a guide to see long-term trends, compare current prices to potential scarcity, and understand why halving events make Bitcoin progressively rarer.
By combining scarcity logic with other tools, you learn not just what the model says, but why it matters to the conversation around Bitcoin’s future. For beginners, understanding scarcity is often the first step toward understanding Bitcoin itself.
Last updated on January 22, 2026
