Key Takeaways

• Plan B is an anonymous Bitcoin analyst known for the S2F model. He has a solid financial background but left traditional finance for Bitcoin.
• Plan B’s Stock-to-Flow (S2F) model is a framework for evaluating an asset’s scarcity based on its existing supply (stock) relative to its annual production (flow).
• Plan B faced criticism in 2020, but the model’s accuracy solidified his reputation.

Who is Plan B?

Plan B is a pseudonymous figure who has become a leading influencer in the cryptocurrency community. Renowned for developing the Stock-to-Flow (S2F) model, Plan B’s work has sparked interest and debate among investors and analysts. Plan B maintains an online presence with a large following of 1.9 million on X (formerly Twitter) with a username @100trillionUSD and 171K subscribers on YouTube (as of July 2024). Through their YouTube channel @PlanB_Bitcoin, they regularly share insights and predictions about Bitcoin. Their insights have influenced market sentiment and investment strategies. Despite maintaining anonymity, Plan B’s contributions have deeply impacted cryptocurrency.

The Stock-to-Flow Model: Understanding Bitcoin’s Scarcity

Plan B’s S2F model establishes a framework for evaluating an asset’s scarcity based on its existing supply (stock) relative to its annual production (flow). Initially applied to metals like gold, the model gained traction in cryptocurrency, particularly in comprehending Bitcoin’s value proposition.

Like gold, Bitcoin’s scarcity is a fundamental characteristic supporting its value. Unlike fiat currencies, which can be inflated, Bitcoin’s supply is capped, making it a potential store of value. This scarcity is further enhanced by the energy-intensive mining process, which limits rapid supply increases.

While the S2F model has correlated with Bitcoin’s historical price movements, it’s important to approach it cautiously. Market sentiment, regulatory interventions, and technological advancements can influence Bitcoin’s price. The S2F model offers a valuable lens for examining Bitcoin’s scarcity but should be considered separate from its price predictions.

Developing the S2F Model

Plan B’s creation of the S2F model involved applying mathematical principles to determine the scarcity of scarce assets, including Bitcoin. The main concept is the connection between scarcity and value, established by calculating the ratio of total supply (stock) to annual production (flow). Plan B then analyzed historical Bitcoin data to validate the model’s predictive capabilities.

Through detailed data mining of the Bitcoin blockchain, Plan B compiled monthly stock-to-flow figures and compared them to corresponding Bitcoin prices. This analysis aimed to demonstrate a statistical relationship between scarcity and market value, supporting the S2F model.

The model’s foundation rests on the mathematical assessment of scarcity and its correlation with Bitcoin’s historical price trajectory.

Is Bitcoin stock-to-flow accurate for price predictions?

The Bitcoin stock-to-flow model has shown some correlation with past price movements, but it’s unreliable for predicting future prices. Key limitations include:

• Volatility: Bitcoin’s price can fluctuate wildly, making it difficult for any model to predict accurately.
• Unforeseen events: Unexpected events, like major regulatory changes, can dramatically impact Bitcoin’s price, which the model doesn’t account for.

Criticisms of the Stock-to-Flow Model

Despite its popularity, the stock-to-flow (S2F) model has faced criticism. One of the primary criticisms is its accuracy, with some experts arguing that the model’s projections of Bitcoin’s price are unrealistic. Additionally, the model’s assumptions about the relationship between scarcity and cost have been challenged, with critics suggesting that the model needs to be revised.

The mathematical formulation of the S2F model has been questioned, with some pointing out potential logical inconsistencies. These criticisms highlight the importance of considering multiple factors when analyzing Bitcoin’s price and avoiding sole reliance on a single model.

While the S2F model has contributed to the discussion around Bitcoin’s value proposition, it’s essential to approach it critically and consider alternative perspectives.

Final Thoughts

While influential and generating significant discussion, the S2F model is not an absolute predictor of Bitcoin’s price.  

Plan B and the S2F model have shaped the cryptocurrency landscape, so it’s crucial to approach the model with a critical eye. The model has shown a correlation with past price movements, but it needs to be more foolproof. Factors beyond scarcity, such as market sentiment, regulations, and technological advancements, impact Bitcoin’s price.  

The complexity of the cryptocurrency market necessitates a multifaceted approach to analysis rather than relying solely on a single model.