Bitcoin Limited Growth ModelThe Bitcoin Limeted Growth is a model proposed by QuantMario that offers an alternative approach to estimating Bitcoin's price based on the Stock-to-Flow (S2F) ratio. This model takes into account the limitations of the traditional S2F model and introduces refinements to enhance its analysis.
The S2F model is commonly used to analyze Bitcoin's price by considering the scarcity of the asset, measured by the stock (existing supply) relative to the flow (new supply). However, the LGS-S2F Bitcoin Price Formula recognizes the need for improvements and presents an updated perspective on Bitcoin's price dynamics.
Invalidation of the Normal S2F Model:
The normal S2F model has faced criticisms and challenges. One of the limitations is its assumption of a linear relationship between the S2F ratio and Bitcoin's price, overlooking potential nonlinearities and other market dynamics. Additionally, the normal S2F model does not account for external influences, such as market sentiment, regulatory developments, and technological advancements, which can significantly impact Bitcoin's price.
Addressing the Issues:
The LGS-S2F Bitcoin Price Formula introduces refinements to address the limitations of the traditional S2F model. These refinements aim to provide a more comprehensive analysis of Bitcoin's price dynamics:
Nonlinearity: The LGS-S2F model recognizes that the relationship between the S2F ratio and Bitcoin's price may not be linear. It incorporates a logistic growth function that considers the diminishing returns of scarcity and the saturation of market demand.
Data Analysis: The LGS-S2F model employs statistical analysis and data-driven techniques to validate its predictions. It leverages historical data and econometric modeling to support its analysis of Bitcoin's price.
Utility:
The LGS-S2F Bitcoin Price Formula offers insights for traders and investors in the cryptocurrency market. By incorporating a more refined approach to analyzing Bitcoin's price, this model provides an alternative perspective. It allows market participants to consider various factors beyond the S2F ratio alone, potentially aiding in their decision-making processes.
Key Features:
Adjustable Coefficients
Sigma calculation methods: Normal or Stdev
Credit:
The LGS-S2F Bitcoin Price Formula was developed by QuantMario, who has contributed to the field of cryptocurrency analysis through their research and modeling efforts.
Stocktoflow
Ripple (XRP) Model PriceAn article titled Bitcoin Stock-to-Flow Model was published in March 2019 by "PlanB" with mathematical model used to calculate Bitcoin model price during the time. We know that Ripple has a strong correlation with Bitcoin. But does this correlation have a definite rule?
In this study, we examine the relationship between bitcoin's stock-to-flow ratio and the ripple(XRP) price.
The Halving and the stock-to-flow ratio
Stock-to-flow is defined as a relationship between production and current stock that is out there.
SF = stock / flow
The term "halving" as it relates to Bitcoin has to do with how many Bitcoin tokens are found in a newly created block. Back in 2009, when Bitcoin launched, each block contained 50 BTC, but this amount was set to be reduced by 50% every 210,000 blocks (about 4 years). Today, there have been three halving events, and a block now only contains 6.25 BTC. When the next halving occurs, a block will only contain 3.125 BTC. Halving events will continue until the reward for minors reaches 0 BTC.
With each halving, the stock-to-flow ratio increased and Bitcoin experienced a huge bull market that absolutely crushed its previous all-time high. But what exactly does this affect the price of Ripple?
Price Model
I have used Bitcoin's stock-to-flow ratio and Ripple's price data from April 1, 2014 to November 3, 2021 (Daily Close-Price) as the statistical population.
Then I used linear regression to determine the relationship between the natural logarithm of the Ripple price and the natural logarithm of the Bitcoin's stock-to-flow (BSF).
You can see the results in the image below:
Basic Equation : ln(Model Price) = 3.2977 * ln(BSF) - 12.13
The high R-Squared value (R2 = 0.83) indicates a large positive linear association.
Then I "winsorized" the statistical data to limit extreme values to reduce the effect of possibly spurious outliers (This process affected less than 4.5% of the total price data).
ln(Model Price) = 3.3297 * ln(BSF) - 12.214
If we raise the both sides of the equation to the power of e, we will have:
============================================
Final Equation:
■ Model Price = Exp(- 12.214) * BSF ^ 3.3297
Where BSF is Bitcoin's stock-to-flow
============================================
If we put current Bitcoin's stock-to-flow value (54.2) into this equation we get value of 2.95USD. This is the price which is indicated by the model.
There is a power law relationship between the market price and Bitcoin's stock-to-flow (BSF). Power laws are interesting because they reveal an underlying regularity in the properties of seemingly random complex systems.
I plotted XRP model price (black) over time on the chart.
Estimating the range of price movements
I also used several bands to estimate the range of price movements and used the residual standard deviation to determine the equation for those bands.
Residual STDEV = 0.82188
ln(First-Upper-Band) = 3.3297 * ln(BSF) - 12.214 + Residual STDEV =>
ln(First-Upper-Band) = 3.3297 * ln(BSF) – 11.392 =>
■ First-Upper-Band = Exp(-11.392) * BSF ^ 3.3297
In the same way:
■ First-Lower-Band = Exp(-13.036) * BSF ^ 3.3297
I also used twice the residual standard deviation to define two extra bands:
■ Second-Upper-Band = Exp(-10.570) * BSF ^ 3.3297
■ Second-Lower-Band = Exp(-13.858) * BSF ^ 3.3297
These bands can be used to determine overbought and oversold levels.
Estimating of the future price movements
Because we know that every four years the stock-to-flow ratio, or current circulation relative to new supply, doubles, this metric can be plotted into the future.
At the time of the next halving event, Bitcoins will be produced at a rate of 450 BTC / day. There will be around 19,900,000 coins in circulation by August 2025
It is estimated that during first year of Bitcoin (2009) Satoshi Nakamoto (Bitcoin creator) mined around 1 million Bitcoins and did not move them until today. It can be debated if those coins might be lost or Satoshi is just waiting still to sell them but the fact is that they are not moving at all ever since. We simply decrease stock amount for 1 million BTC so stock to flow value would be:
BSF = (19,900,000 – 1.000.000) / (450 * 365) =115.07
Thus, Bitcoin's stock-to-flow will increase to around 115 until AUG 2025. If we put this number in the equation:
Model Price = Exp(- 12.214) * 114 ^ 3.3297 = 36.06$
Ripple has a fixed supply rate. In AUG 2025, the total number of coins in circulation will be about 56,000,000,000. According to the equation, Ripple's market cap will reach $2 trillion.
Note that these studies have been conducted only to better understand price movements and are not a financial advice.
{Gunzo} Stock to Flow (Gold, Silver, Dollar, Bitcoin)This indicator displays the Stock to Flow (S2F) ratio for popular commodities (Gold, Silver, Dollar, Euro, Bitcoin, Ethereum) in order to
compare them and determine which ones could be a good Store of Value (SoV).
OVERVIEW :
Stock to Flow is a popular indicator used to predict commodities scarcity. It evaluates the total stock of a commodity against the total amount that can be produced during a year. This model supposes that if scarcity is increasing, the price is going to increase.
This model has been used over the last years on Bitcoin to determine if the asset was undervalued or overvalued, and even make prediction models on the future price.
This script is going to focus on the Stock to Flow ratio (total stock/amount produced) to compare the following assets over time :
Mining resources (mined) for Gold and Silver
Cryptos assets (mined) for Bitcoin and Ethereum
FIAT currencies (banknotes printed) for Dollar and Euro
CALCULATION :
The calculation of the Stock to Flow ratio evaluates the total stock of a commodity produced against the production made for a specific year. The data is calculated on a yearly basis, then interpolated to get monthly or daily values.
DATA ORIGIN :
The main information needed to calculate the Stock to Flow ratio is the "yearly production" of a commodity. I tried to retrieve that information from the most reliable sources :
for Gold from research on www.gold.org
for Silver from research on www.silverinstitute.org
for Ethereum from research on etherscan.io
for Bitcoin from data source "QUANDL:BCHAIN/TOTBC" from www.quandl.com
for Dollar from research on www.federalreserve.gov
for Euro from research on www.ecb.europa.eu
SETTINGS :
Smoothing for interpolated data : Smoothing factor for assets that are calculated yearly and then interpolated (Gold, Silver, Dollar, Euro, and Ethereum)
Smoothing for non interpolated data : Smoothing factor for assets that are calculated daily and not interpolated (Bitcoin)
Display asset names : Display assets names in a colored rectangle on the right side of the chart
Display asset values : Display assets Stock to Flow ratio in a colored rectangle on the right side of the chart
Display key events for assets : Display important events for the assets at the bottom of the chart using the same color as the assets lines (for example Orange diamond is a Bitcoin halving). Please refer to the script code for the details of all events.
USAGE :
This script can be used on any asset available on TradingView as the data used is either static or external.
However I recommend using it the Gold asset from currency.com as the depth of the chart will be bigger (since 1980s).
It is recommended to used this script on the monthly timeframe as the chart data is calculated yearly and then interpolated.
Bitcoin S2F(X)This indicator shows the BTCUSD price based on the S2F Model by PlanB.
We can see not only the S2F(Stock-to-Flow) but also the S2FX(Stock-to-Flow Cross Asset) model announced in 2020.
█ Overview
In this model, bitcoin is treated as comparable to commodities such as gold .
These commodities are known as "store of value" commodities because they retain their value over time due to their relative scarcity.
Bitcoins are scarce.
The number of coins in existence is limited, and the rate of supply is at an all-time low because mining the 2.2 million outstanding coins that have yet to be mined requires a lot of power and computing power.
The Stock-to-flow ratio is used to evaluate the current stock of a commodity (the total amount currently available) versus the flow of new production (the amount mined in a given year).
The higher this ratio, the more scarce the commodity is and the more valuable it is as a store of value.
█ How To View
On the above chart price is overlaid on top of the S2F(X) line. We can see that price has continued to follow the stock-to-flow of Bitcoin over time. By observing the S2F(X) line, we can expect to be able to predict where the price will go.
The coloured circles on the price line of this chart show the number of days until the next Bitcoin halving event. This is an event where the reward for mining new blocks is halved, meaning miners receive 50% fewer bitcoins for verifying transactions. Bitcoin halvings are scheduled to occur every 210,000 blocks until the maximum supply of 21 million bitcoins has been generated by the network. That makes stock-to-flow ratio (scarcity) higher so in theory price should go up.
The stock-to-flow line on this chart incorporates a 463-day average into the model to smooth out the changes caused in the market by the halving events.
I recommend using this indicator on a weekly or monthly basis for BITSTAMP:BTCUSD .
█ Reference Script
Bitcoin Stock to Flow Multiple by yomofoV
Sushi Stock To Flow RainbowHello everyone,
as always, I hope you are doing well.
To sum up:
The stock-to-flow is the number we get when we divide the total stock by the annual production (flow).
It indicates how many years are required, at the current production rate, to produce what is in the current stock.
The stock is simply the total in circulation, in our case, the number of Sushi in circulation.
On the other hand, the flow is the total number of Sushi created each year.
In our case:
- The number of new sushi issued is reduced every month
- The total number of sushi in circulation is set at 250 million
- The last reduction will take place in October 2023
The empirical formula of the stock to flow is, in our case: total number of sushi in circulation / number of sushi produced each month.
Bitcoin Stock to FlowModeling Bitcoin's Value With Scarcity
The Stock to Flow model for Bitcoin suggests that Bitcoin price is driven by scarcity over time.
Bitcoin is the first scarce digital object the world has ever seen. It is scarce like silver & gold, and can be sent over the internet, radio, satellite etc. Bitcoin includes a mathematical mechanism to restrict its supply over time making it more rare as time goes on. Digital Scarcity.
In 2017 BTC exceeded the market capitalization of Silver. After the next halving in 2024, Bitcoin will become the hardest asset the world has ever seen, rarer than Gold.
There is only enough Bitcoin in the world for each person to own .0023 BTC. Because of this, Bitcoin's value should continue to rise over time.
Stock to Flow Model with Standard Deviation BandsThis Study takes the Stock to Flow Model for Bitcoin as presented by 100trillionUSD and smoothes it using an SMA. Then it calculates the close's standard deviation from it and displays the 2-Sigma Bands.
The stock to flow model seems to be one of the best predictions of Bitcoins price.
The standard deviation bands are supposed to show situations in which Bitcoin is significantly over- or under-bought.
A Simple Bitcoin Stock to Flow ModelThis is just a bit of fun. Stock to flow is a hot topic so I thought I'd mess around. Here is a model that is very closely based on the one available here: digitalik.net . I take no credit for the actual model.
It can be tuned with parameters a and b, but this is the best fit imo.
The model is a bit pointless as Tradingview doesn't let us run scripts on future candles, so no predictions.
The blue line is the actual model and the pink line is a 200 MA.
Run this script on the DAILY chart please ;)
Here's a close up of current action. Interesting maybe ;)
Bitcoin Stock To Flow Model Value (fixed)This indicator shows the Bitcoin value based on the Stock To Flow Model by planB
Fixed version of the original script by yomofoV:
Split up into 2 seperate indicators so you can put it into two seperate panes. This is the S2F Model Value.
You can find the S2F Multiple indicator here:
Bitcoin Stock to Flow Multiple (fixed)This is a fixed version of the original script by yomofoV:
I fixed the variable assignments and added switching of timeframes over indicator inputs.
To switch timeframes click on the indicator, open its settings and switch the timeframe to either monthly, weekly or daily.
Bitcoin Stock to Flow Multiplethis study plots the price of btc over the Stock to Flow Model value
idea credited to: 100trillionUSD
my data is a bit off compared to the original source but overall it seems correct
