Podcast Notes Key Takeaways

• Monetary assets have higher S2F ratios compared to commodities. Otherwise, producers can flood the market and crash the price
• Because of its supply cap of 21 million coins, Bitcoin is the first scarce digital object the world has ever seen
  • Bitcoin halving is a significant event (every ~4 years, or 210,000 blocks, the supply rate of new coins is halved)
• In the new model, PlanB introduces the concept of “Phase Transitions”, how the properties of an item can completely change
  • For example, Bitcoin went from a proof of concept to payments network, E-gold, and now it’s considered a financial asset
• Data used in the original stock to flow model showed some clustering, the new model quantifies those clusters, and maps them to Bitcoin’s phase transitions
  • The model predicts a Bitcoin price of $288K by 2024
• If Bitcoin’s S2F doubles and market value doesn’t increase in the coming 4 years, the model will break
• Post halving, only the strong believers, the efficient miners, and visionary investors will remain
•  “This thing is not a toy anymore, and it’s maybe not an asset anymore as well. It is going to be much bigger than that.” — Plan₿

Read the full notes @ podcastnotes.org

Location: Zoom
Date: Wednesday 29th April
Project: Independent Trader
Role: Bitcoin Quant Analyst

Plan₿'s Stock-to-Flow model was warmly received by many in Bitcoin. The chart gave context to price action around halvings, validating the importance of scarcity. The S2F model does have critics, and with the third halving approaching, some had questioned whether the reducing subsidy drive price.

The halving is one of the most significant events in the Bitcoin calendar. Every 210,000 blocks (~4 years) the block subsidy issued to the miners reduced by half. Initially, the block reward was 50BTC, now 11 years later on approximately May 12th, we will have the 3rd halving taking the block reward from 12.5BTC to 6.25BTC. By the end of this reward period on May 12th, 87.5% of all Bitcoin will have been mined.

Satoshi implemented the halving as a way of controlling inflation, front-loading the rewards to kick start the protocol. Dan Held stated that halvings are a viral marketing loop which creates awareness.

Historically, the Bitcoin price in the weeks and months following the halving has seen significant moves to the upside, with supply cut in half Bitcoin becomes more scarce and demand may increase.

The Stock-to-Flow model tracks the scarcity of an asset and following the halving the stock to flow ratio of Bitcoin will rise from 25 to 50, meaning it would take 50 years for miners to mine enough Bitcoin to match the current Bitcoin supply, at the current level of issuance. When applied to non-digital assets such as gold and silver, stock-to-flow becomes a benchmarking tool.

Plan B identified a flaw in the model, the overreliance on time. In the latest version of his model, Bitcoin Stock-to-Flow Cross Asset Model (S2FX), time is removed, and other assets such as gold and silver are added. The new model includes a significant change, Phase Transitions, which identifies that the properties of an asset can change. These changes in the properties of Bitcoin, for example maturing from digital cash to digital gold, identify why the market for the asset grows; thus, there is increasing demand.

In this interview, I talk to Bitcoin Quant Analyst & creator of the popular stock to flow model, Plan₿. We discuss his new S2FX model, the upcoming Bitcoin halving, predicted price action and the impact on miners.

This episode’s sponsors:
Kraken - The best place to buy, sell & trade Bitcoin
BlockFi - The future of Bitcoin financial services
Cointracker - Bitcoin taxes and portfolio manager
Sportsbet.io - Online sportsbook & casino that accepts Bitcoin

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WBD219 Show Notes: https://www.whatbitcoindid.com/podcast/could-bitcoin-really-be-heading-to-288k-with-plan

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