Bitcoin has captivated investors, technologists, and economists since the release of its white paper in 2008. One of the most persistent questions since its inception is: How do we value Bitcoin? Traditional valuation models—like price-to-earnings (P/E), price-to-sales (P/S), or discounted cash flow (DCF)—don’t apply. Bitcoin generates no revenue, pays no dividends, and has no balance sheet. So what gives it value?
The answer, according to many in the crypto community, lies in scarcity—a trait it shares with gold. This concept forms the foundation of Plan B’s Stock-to-Flow (S2F) model, one of the most discussed and debated frameworks in Bitcoin valuation.
What Is the Stock-to-Flow Model?
The stock-to-flow ratio measures how scarce an asset is by dividing the total existing supply ("stock") by the amount produced annually ("flow"). For example:
- Gold has a stock-to-flow ratio of about 62, meaning it would take 62 years of current mining output to match existing above-ground reserves.
- Silver, by contrast, has a much lower S2F of around 22, indicating less scarcity.
- Bitcoin currently has an S2F of over 55—and rising.
👉 Discover how scarcity drives digital asset value with real-time market insights.
The higher the S2F, the more scarce the asset is perceived to be—and historically, high scarcity correlates with higher market value. This principle is what inspired Plan B’s model.
Who Is Plan B?
Plan B is the pseudonym of an anonymous Dutch institutional investor who entered the Bitcoin space in 2013. With academic backgrounds in quantitative finance and financial law, he spent years searching for a reliable way to value digital assets. Finding none, he created his own.
Drawing inspiration from Saifedean Ammous’s seminal book The Bitcoin Standard, Plan B developed a statistical model linking Bitcoin’s market value to its stock-to-flow ratio. In 2019, he published his findings in a widely circulated paper titled Modeling Bitcoin’s Value with Scarcity, which quickly gained traction across financial and crypto circles.
Despite his anonymity—symbolized by a signature hat in his public appearances—Plan B’s work has influenced how many investors understand Bitcoin’s long-term potential.
How Does the Stock-to-Flow Model Work?
The core idea is simple: as Bitcoin becomes scarcer, its value increases. This scarcity is enforced through halving events, which occur roughly every four years. During each halving, the reward for mining new blocks is cut in half, reducing the flow of new bitcoins into circulation.
Because the total supply is capped at 21 million, each halving increases Bitcoin’s stock-to-flow ratio—doubling it every four years. Plan B used 111 historical data points (from 2009 to 2019) to run a linear regression analysis and found a strong correlation (R² = 95%) between Bitcoin’s market capitalization and its S2F ratio.
His original model predicted that after the 2020 halving, Bitcoin would reach a market cap of **$1 trillion**—a target it achieved in 2021 when BTC surpassed $50,000.
Key Features of the Model:
- Blue data points represent periods close to halvings.
- Red points show prices months after halvings.
- Yellow and grey markers represent gold and silver, which also align with the S2F trendline.
This cross-asset alignment suggests that scarcity, not utility, may be the primary driver of value for certain assets.
The Stock-to-Flow Cross-Asset Model
In 2020, Plan B introduced an upgraded version: the Stock-to-Flow Cross-Asset Model. Unlike the original time-series model, this version compares Bitcoin directly with other scarce assets like gold and silver.
A key concept in this model is phase transitions—a term borrowed from physics. Just as water transitions between solid, liquid, and gas states, financial assets can undergo structural shifts in perception and use.
Bitcoin’s Phase Transitions:
- Proof-of-Concept (2009–2010): Early adopters testing the network.
- Payments Era (2011): BTC used for transactions (e.g., the $10,000 pizza).
- E-Gold Phase (2012–2016): Viewed as digital gold after early halvings.
- Financial Asset (2017–present): Institutional adoption begins; seen as a store of value.
Plan B argues that Bitcoin is now transitioning into a global reserve asset, similar to gold—but with superior scarcity and portability.
This updated model claims an even stronger correlation (R² = 99.7%) across multiple asset classes, reinforcing the idea that scarcity governs long-term value.
Does the Stock-to-Flow Model Hold Up?
While compelling, the model isn’t without critics.
Arguments in Favor:
- Successfully predicted Bitcoin’s $1 trillion market cap post-2020 halving.
- Strong statistical correlation across multiple cycles.
- Aligns with economic principles of supply and demand.
Criticisms:
- Ethereum co-founder Vitalik Buterin cautions that correlation does not imply causation.
- Critics like Nico Cordeiro (CIO at Strix Leviathan) label it a “chameleon model”—plausible on the surface but flawed under scrutiny.
- Long-term projections are extreme: one version suggests Bitcoin could reach $235 billion per coin by 2045, a figure many deem unrealistic.
Moreover, financial markets are influenced by more than just supply mechanics—regulation, macroeconomic trends, adoption rates, and sentiment all play crucial roles.
👉 See how market cycles and scarcity models shape future price predictions.
Frequently Asked Questions (FAQ)
Q: What does “stock-to-flow” mean in simple terms?
A: It’s a measure of scarcity. “Stock” is how much of an asset exists now; “flow” is how much new supply is produced each year. A high ratio means the asset is hard to reproduce, increasing its perceived value.
Q: Why does Bitcoin’s stock-to-flow ratio increase?
A: Because of halving events. Every four years, the number of new bitcoins created per block is cut in half, reducing annual supply growth while demand rises or remains steady.
Q: Has the S2F model been accurate?
A: It was remarkably accurate from 2010 to 2021, predicting major price movements post-halving. However, since 2022, Bitcoin has traded below its S2F predicted value, leading to debates about its relevance.
Q: Can the S2F model predict short-term prices?
A: No. The model is designed for long-term valuation, not short-term trading. It reflects trends over multiple cycles, not weekly or monthly fluctuations.
Q: Is Bitcoin better than gold according to this model?
A: Yes—in terms of scarcity. Gold’s supply can increase if large new deposits are found. Bitcoin’s supply is mathematically capped at 21 million, making it more predictable and resistant to inflation.
Q: Should I invest based on the S2F model?
A: Use it as one tool among many. While it highlights Bitcoin’s scarcity-driven value proposition, always combine it with technical analysis, macro trends, and risk management.
Current Market Outlook
In a 2025 interview with Scott Melker, Plan B reiterated that this market cycle isn’t over. Based on on-chain data and adoption trends, he believes Bitcoin could reach $400,000–$500,000 before correcting to $100,000–$200,000.
He attributes this potential surge to:
- Growing institutional interest
- Retail FOMO (fear of missing out)
- Limited supply due to halvings
However, he stresses three important caveats:
- Only invest what you can afford to lose.
- Treat S2F targets as long-term averages, not precise predictions.
- Recognize that geopolitical forces—especially government regulation—could disrupt any model.
👉 Track real-time Bitcoin metrics and prepare for the next market cycle.
Final Thoughts
The Stock-to-Flow model offers a compelling narrative: Bitcoin’s value comes from its unchangeable scarcity. While not perfect—and certainly not predictive in the short term—it provides a framework for understanding why demand surges after halvings and how adoption fuels price growth.
Whether you’re a skeptic or a believer, one thing is clear: Bitcoin challenges traditional financial models. Its evolution from digital curiosity to global asset class mirrors a phase transition in motion.
So instead of seeking certainty in models, focus on understanding the fundamentals—scarcity, decentralization, and growing adoption. And if you believe in Bitcoin’s long-term vision?
HODL—and revisit your portfolio in ten years.
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