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Investors should be 'cautious' when using BTC stock-to-flow model: Analyst

  //stocks-investing.news-articles.net/content/202 .. -when-using-btc-stock-to-flow-model-analyst.html
  Published in Stocks and Investing on Sunday, October 26th 2025 at 16:40 GMT by CoinTelegraph
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Bitcoin Investors Caution Over Relying on Stock‑to‑Flow Model

In recent weeks, the crypto press has been abuzz with commentary on the growing skepticism that investors are developing toward Bitcoin’s Stock‑to‑Flow (S2F) valuation model. The discussion, sparked by a recent Cointelegraph article, centers on the fact that while the S2F framework has enjoyed remarkable predictive success in the past, many market participants now view it as an overly simplistic lens that may fail to capture the full complexity of Bitcoin’s price dynamics.

The Appeal of S2F

The S2F model, popularized by analyst PlanB, compares Bitcoin’s existing supply (the “stock”) with the amount of new coins being mined each year (the “flow”). By calculating the ratio between these two figures, the model estimates a scarcity premium that is then translated into a projected price. In its simplest form, the higher the S2F ratio, the scarcer Bitcoin becomes, and the higher its price is expected to climb. The model gained wide acclaim after it correctly predicted the historic 2017 bull run and the subsequent 2020–2021 rally, which saw Bitcoin’s price surge from roughly $4,000 to an all‑time high of $69,000.

Why Investors Are Turning Cautious

The current wave of caution is largely driven by Bitcoin’s recent price volatility and a series of macroeconomic shocks that have unsettled both retail and institutional investors. A major factor is the perception that the S2F model, which was built on a relatively static supply curve, does not adequately account for the dynamic nature of demand drivers. For example, regulatory developments in key markets such as the United States and China can shift investor sentiment abruptly, while institutional adoption trends—such as the expansion of Bitcoin ETFs and corporate treasury holdings—create new layers of demand that the model does not predict.

Another point of concern is the model’s reliance on a deterministic halving schedule. While Bitcoin’s protocol does mandate a halving every 210,000 blocks, the precise timing of these events can be affected by network difficulty adjustments and other operational factors. This uncertainty raises the question of whether the S2F model can maintain its precision in an environment where mining output may not strictly adhere to the predicted cadence.

Link‑in‑Link: A Critical Review of the S2F Model

The Cointelegraph piece also pulls in insights from a recent academic review titled “The Stock‑to‑Flow Model and Bitcoin’s Price: A Critical Review.” The paper, published in the Journal of Cryptocurrency Economics, scrutinizes the statistical robustness of the S2F framework. Key findings include that the model’s predictive power diminishes significantly after 2019 when the price trajectory started to deviate from the S2F curve. The authors argue that the model’s overreliance on supply scarcity ignores crucial variables such as transaction volume, user growth, and global macroeconomic indicators.

The review also points out that the S2F model’s linear extrapolation approach fails to account for saturation points in market depth. In other words, as Bitcoin’s price climbs higher, the liquidity available to support further price increases may become limited, causing a potential price ceiling that the model cannot predict.

Investor Reactions and Alternative Valuation Metrics

During a recent Bitcoin Investor Forum, several prominent hedge fund managers expressed that they are no longer using S2F as a standalone valuation tool. Instead, they are incorporating a mix of on‑chain metrics—such as active addresses and transaction fees—alongside macro indicators like sovereign debt levels and commodity inflation rates. Some participants pointed to the Crypto Valuation Index (CVI), a composite metric that blends supply‑based, demand‑based, and network‑health indicators to produce a more balanced view.

One investor noted, “While the S2F model provided an early warning about Bitcoin’s potential upside, it was never designed to be the final word. Today’s market is more interconnected, and we need a valuation framework that can adapt to changes in demand, regulation, and technology.”

A Call for a Multi‑Facet Approach

The overarching consensus emerging from the discussion is that a multi‑facet approach to Bitcoin valuation is now necessary. S2F should be seen as one of many tools rather than a crystal ball. By integrating supply metrics with demand indicators, on‑chain activity, and macro‑economic data, investors can better gauge Bitcoin’s true value and its trajectory over the next few years.

Conclusion

The debate around Bitcoin’s S2F model reflects a broader shift in how the crypto community is approaching asset valuation. While the model’s historical accuracy is undeniable, its limitations are increasingly apparent in a world of rapid technological advancement and heightened regulatory scrutiny. As Bitcoin continues to mature, investors are gravitating toward a more holistic, data‑driven approach that recognizes the multifaceted drivers of price movement. The result is a more nuanced view of Bitcoin’s future, one that balances the allure of scarcity with the realities of market demand and institutional influence.