🔥 Bitcoin Stock-to-Flow Cross Asset Model is right!

almost 4 years ago

Hello!

Today one of my favorite authors @100trillionUSD (link to their twitter), published something really interesting. Actually, it was a Medium article wrote by Peter Harrigan (twitter) where he uses his well known Bitcoin stock to flow (S2F) to calculate the US housing market.

The interesting part is that once calculated Peter merged the data with the Cross Asset Model where Bitcoin is compared with Silver and Gold. (The last 2 dots green/blue are the US house market).

In the following lines I will try to explain the chart below for those unfamiliar.

Source

I will use Peter words to put some perspective:

On this model it is showed that there is a correlation between the market capitalization of Bitcoin and the ratio of existing Bitcoin to annual production of Bitcoin. This relationship appears to hold with gold and other metals.

According @100trillionUSD there are 4 phases for Bitcoin, distinguished in 4 different clusters in the chart. They are represented using the following formula to calculate the S2F ratio:

Market Value = exp(12.7598) * stock/flow ratio ^ 4.1167

The blue dots are the real values and the colored circles are the REAL ones.
Then he used the same conditions and applied the formula for the Silver and Gold. The results were quite impressive as they appear to follow the tendency of the model.

And after this amazing chart, it comes Peter and uses the US house market data calculated in two different ways and the results match perfectly with the Asset Model!

Source