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The Stock-to-Flow (S2F) model, popularized by analyst PlanB, has received as much a wave of initial admiration as subsequent criticism.
Recently, the creator of this famous model published his latest long-term chart called Bitcoin Market Stages.
The main conclusion of the Bitcoin Market Stages is that the largest cryptocurrency has entered a new bull market as of early 2023. As PlanB explains in a YouTube video, the new model is based on only one on-chain variable. However, he does not reveal which metric he is referring to.
The analyst then adds that Bitcoin Market Stages is not a predictive or valuation model (like Stock-to-Flow, for example). Its sole purpose is to try to estimate (detect) what stage of the market cycle Bitcoin is in. PlanB highlights the advantages of its new model in simple terms:
“It’s my favorite chart after Stock-to-Flow, because it’s very simple, intuitive, and useful.”
Bitcoin Market Stages: The Market Moves in Cycles
The basic premise of Bitcoin Market Stages is that every market (including cryptocurrencies and Bitcoin) moves in cycles. Moreover, these cycles are based on mathematical and fractal similarities, which are nothing more than a quantitative representation of human psychology.
The analyst believes that “the emotions associated with the phase of the cycle can tell you something completely different; therefore, it is important to know which stage of the cycle you are in.” Hence the idea for the Bitcoin Market Stages chart – to make his followers aware that the market often shows something fundamentally different from our emotions.
PlanB’s new model is very simple and assumes that the market cycle contains 4 consecutive phases or stages:
- Early bull market (blue)
- Late bull market (green)
- Early bear market (yellow)
- Late bear market (red)
Looking at the above chart, we see that the late bear market phase ended at the end of 2022. Moreover, it completed the 4th consecutive cycle, counting from 2011. PlanB concludes:
“We’re not starting a new cycle, so we’re now in an early bull market IMO.”
Stock-to-Flow (S2F) Update
In addition to presenting its new chart, PlanB is also discussing an update of its famous S2F. It is based on historical halvings, of which there have been 3 so far, while another 4th halving is expected as early as next year.
PlanB explains that “halving introduces an increased scarcity of Bitcoin. Therefore, the market value of BTC is expected to increase in between halvings.”
It is interesting to note that the famous analyst has created at least 3 versions of S2F over the years. The original model was published in 2019 and is based on monthly valuations of BTC and its scarcity generated by subsequent halvings. In this model, the current price of BTC is estimated at $55,000.
The other two models are the yearly S2F and the so-called Stock-to-Flow Cross Asset Model (S2FX). According to the first, the average price of BTC in the current cycle should be $100,000. According to the second, as much as $288,000. Although the latter value is significantly different from Bitcoin’s current price, PlanB says:
“I still think that the Stock-to-Flow Cross Asset Model, based on gold and silver, is fundamentally the most valuable model.”
However, moments later he adds that for now, the first, original model is the most accurate. It predicts the average price of Bitcoin in the current cycle at $55,000.
PlanB: Bitcoin Will Surge 100% by 2024
The analyst assumes that in the future Bitcoin will be 2 times more scarce than gold. If this happens at some point, its market capitalization will also overtake gold’s market capitalization. As of this moment, gold’s market capitalization is about $10 trillion and is about 20x larger than that of BTC.
PlanB notes that currently Bitcoin price is reversing and approaching the values set by the model. He goes on to add that every time halving has occurred, the BTC price has reached exactly the values assumed by the original Stock-to-Flow model. Halving is indicated by a change in the color of the monthly dots from blue to red.
If this repeats at the next halving, Bitcoin should approach the $55,000 – $60,000 area. This would be equivalent to an increase in BTC of about 100% from today’s valuation.
According to the latest projections, the next halving should take place on April 5, 2024. This would mean that Bitcoin would have to gain about $30,000 in 12 months. Thus, the average monthly increase of the largest cryptocurrency should be $2,500 / month.