The current price of bitcoin appears to be significantly overpriced compared to that indicated by the stock to flow model.
This was revealed on Twitter by S2F Multiple, which points out that the current price of BTC in dollars according to the 463-day Stock-to-Flow Multiple model would be only $36,800, compared to over $51,000 for the current price.
Stock-to-Flow Multiple (463d)
2021-02-28, 23:59 UTC
ln(actual / model)
Actual price: $45,359.46
Model price: $36,851.01
S2F multiple: 0.21 pic.twitter.com/rGgfgNmS3C
— S2F Multiple (@s2fmultiple) March 1, 2021
To tell the truth, there are discrepancies between the price level hypothesised by S2F Multiple, $36,800, and that of the digitalik.net chart, $35,000, but the trend described by the two sources is similar.
In fact, both, projecting into the future the same trend as in past years, estimate that the price of BTC could exceed $100,000 by the end of the year.
However, it must be stressed that the 463-day Stock-to-Flow curve should not be considered as a forecast, but only as a projection of the past trend. In fact, it is too uniform and linear to correctly represent the daily bitcoin price trend.
The stock-to-flow model on Bitcoin
Having said that, it should also be pointed out that when applied to the bitcoin price curve from 2010 to the present, i.e. since we have reliable data on market trading prices, the algorithm behind the 463-day Stock-to-Flow seems to describe its long-term evolution quite well.
For instance, as early as the beginning of last year, this algorithm projected the price of BTC towards new highs at the end of 2020, and in the end this is exactly what has come true.
So while the 463-day stock-to-flow curve should not be seen as a prediction of how the bitcoin price might move in the short term, it is a good yardstick for assessing medium to long term developments.
For example, the current price of around $51,000 should be reached in two months, according to the projection of this model, while $100,000 should be reached in mid-August.
So, in other words, the current BTC price level is either a couple of months ahead of Stock-to-Flow 463, or it would be overestimated.
However, since this projection cannot be used as a prediction for short-term price developments, it should not be taken as a reference for trying to guess what might happen in the coming days or weeks.
Finally, it should also be added that several analysts have over time expressed favourable opinions on the ability of this model to indicate the course followed by the price of bitcoin in the medium to long term, although not necessarily accurately, and above all without any real certainty that the projection will always prove to be accurate.