Bitcoin (BTC) stock-to-flow (S2F) model has made one of its most bullish predictions to date, predicting BTC to reach $222,000. However, Bitwise analysts warned that Bitcoin’s mature market may be growing beyond its forecast framework.
As Bitcoin’s presence in global finance increases, the reliability of price prediction models becomes important. Once the cornerstone of long-term valuations, the S2F model is currently being revisited as changing market forces call its core assumptions into question.
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Has Bitcoin surpassed the stock-to-flow model?
For context, the Stock-to-Flow model measures the value of Bitcoin based on scarcity. Compare the existing supply (stock) with the annual new supply (flow). The higher this ratio, the rarer and more valuable Bitcoin is considered to be.
PlanB created this model in 2019. This model relates Bitcoin’s price increase to a halving event that reduces the issuance of new coins every four years. The stock-to-flow model predicts that Bitcoin could rise to $222,000 by 2026.
In the long term, the model predicts a 10-year valuation of an impressive $10.9 million per BTC, implying an annualized growth rate (CAGR) of approximately 58.3%.
However, Andre Dragos, head of European research at investment firm Bitwise, suggested that investors should exercise caution when utilizing the S2F model as it may no longer fully capture the reality of today’s Bitcoin market.
“While the S2F model is arguably one of the more bullish frameworks, it should be used with caution; its statistical issues and exclusion of demand-side factors limit its reliability,” Dragosh wrote.
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The analyst highlighted criticisms of Cliff Ganz’s model. In 2020, the same economist argued that this is “misspecified” because Bitcoin’s halving, which doubles the S2F ratio every four years, makes the variable time-dependent rather than stochastic.
“Beyond theory, Bitcoin is consistently below the S2F implied price. The residuals show negative drift and are non-stationary, suggesting omitted variables and statistical flaws,” Dragosh added.
Additionally, the analyst emphasized that Bitcoin’s macro environment has evolved since Plan B’s initial analysis.
“Currently, institutional demand (from Bitcoin ETPs and government bond holdings) exceeds the annual supply decline from the most recent halving by more than seven times,” he said.
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Beyond scarcity: BAERM and power laws gain attention
In addition to S2F, Dragosh compared two other widely referenced Bitcoin valuation models, noting that they are more accurate but still show a bullish trajectory.
The Halving Supply Shock Model, also known as the “Bitcoin Autocorrelated Exchange Rate Model” (BAERM), uses historical price data to measure how each Bitcoin halving affects its price over time. It also takes into account the reduced impact of supply shocks.
The BAERM model currently estimates Bitcoin’s “fair value” at $159,000, and projects it to reach $173,000 by the end of 2025 and $7.59 million over 10 years. It has historically shown a strong predictive fit of approximately 88% R² from the second half-life onwards.
Despite its strengths, BAERM may now be “slightly outdated” because it does not fully account for the impact of changing institutional purchasing and adoption trends, according to Dragosh.
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“It also does not take into account the re-acceleration of earnings due to an S-curve-type adoption pattern. However, if you believe that the importance of halving is still high, then this model is for you,” the analyst said.
Finally, the power law model ties the price of Bitcoin to a time-based formula. This matches an impressive 99% R² for logarithmic regression, but is significantly conservative.
The firm’s 10-year Bitcoin price forecast of $2.03 million is based on the idea that profits will continue to decline as Bitcoin ages, and is much lower than S2F and BAERM. However, ongoing changes in market structure mean that even conservative forecasts may need to reflect the potential for new demand-driven growth.
“Technology adoption curves tend to follow an S-curve pattern of demand, with demand reaccelerating during the transition from ‘early adopters’ to ‘early majority.’ This seriously questions the power law hypothesis of diminishing returns. Moreover, since January 2024, the market structure has essentially changed with the rise of ETFs and institutional investors. Past performance patterns may no longer hold true after the halving,” Dragosh said.
Therefore, while classic models such as Stock-to-Flow, BAERM, and power law still provide valuable perspective on Bitcoin’s long-term trajectory, they increasingly fall short of capturing today’s demand-driven market. The next market cycle may reveal whether these frameworks evolve or give way to new paradigms.
