Introduction: The Model That Captured Crypto's Imagination
In March 2019, an anonymous quantitative analyst known only as "PlanB" published an article that would reshape how investors viewed Bitcoin's valuation. The piece, titled "Modeling Bitcoin Value with Scarcity," introduced the cryptocurrency community to the Stock-to-Flow (S2F) model—a framework borrowed from precious metals analysis that suggested Bitcoin's price could be predicted based on its scarcity ratio. The model's striking predictions and elegant simplicity made it viral, turning PlanB into a crypto celebrity with over 1.8 million Twitter followers and making the S2F chart one of the most widely shared images in cryptocurrency history.
The core premise was intoxicating in its simplicity: Bitcoin's price would rise exponentially as its supply rate (flow) decreased relative to its existing supply (stock), primarily through the halving events that slash mining rewards every four years. During Bitcoin's 2020-2021 bull run, the model appeared almost magical in its accuracy, tracking price movements with uncanny precision as Bitcoin surged from under $10,000 to nearly $69,000. PlanB's "worst-case scenario" predictions became lore: $55,000 by the end of 2021, with potential for six-figure valuations.
But then reality intervened. Following the November 2021 peak, Bitcoin entered a brutal bear market that saw prices collapse below $16,000—a level the S2F model suggested should be impossible given the supply dynamics. The model's prediction of $100,000+ prices during 2022 never materialized, and the deviation between predicted and actual prices widened into a chasm. By 2025, with Bitcoin trading in the $95,000-$122,000 range—well below the S2F model's projection of $288,000 to $420,000—debates about the model's validity reached fever pitch.
As we enter 2026, the question isn't whether the S2F model has deviated from reality—it demonstrably has—but whether this deviation represents a temporary dislocation or a fundamental invalidation of the model's underlying assumptions. This comprehensive analysis examines the S2F model's mechanics, its historical performance, the statistical criticisms that undermined its credibility, and whether any predictive value remains for investors navigating the current market cycle.
BTC Price vs. S2F Target (Jan 2026)
Understanding the Stock-to-Flow Model Mechanics
The Scarcity Calculation
The Stock-to-Flow model quantifies scarcity by dividing the total existing supply of an asset (stock) by its annual production rate (flow). For Bitcoin, this calculation yields a ratio indicating how many years it would take current production to recreate the existing supply. Gold, with its millennia of accumulated stock and relatively low annual mining output, commands an S2F ratio of approximately 60-62. Silver sits around 22. Bitcoin's genius, in S2F terms, lies in its algorithmically enforced halving events that programmatically cut the flow in half every 210,000 blocks.
S2F Ratio = Stock (total existing supply) ÷ Flow (annual production)
Pre-Halving (April 2024): 19.7M BTC ÷ 328,500 BTC/year = ~60
Post-Halving (Current): 19.8M BTC ÷ 164,250 BTC/year = ~120
Prior to the April 2024 halving, Bitcoin's S2F ratio stood at approximately 56. Post-halving, with block rewards reduced from 6.25 to 3.125 BTC per block, the ratio doubled to roughly 112—ostensibly making Bitcoin "scarcer" than gold according to the model. The mathematical relationship PlanB identified suggested that this increasing scarcity would drive exponential price appreciation.
PlanB's Projections
PlanB's initial model predicted Bitcoin reaching $55,000 around the April 2024 halving, with potential for $500,000 to $1 million by year-end 2025. The updated Cross-Asset S2F (S2FX) model, introduced in April 2020, incorporated gold and silver as comparison points and projected even more aggressive targets: $288,000 between 2020-2024, and long-term valuations reaching $10.9 million within a decade—representing an annualized compound growth rate of 58.3%.
The model's elegance captivated institutional and retail investors alike. By reducing Bitcoin's complex value proposition to a single scarcity metric, it offered a narrative that was easy to understand, visually compelling when charted, and empirically validated by several years of price action. For a market hungry for analytical frameworks in an asset class dismissed by traditional finance, S2F provided intellectual legitimacy and a roadmap to seven-figure Bitcoin.
When the Model Worked: The Glory Days (2015-2021)
From roughly 2015 through late 2021, Bitcoin's price appeared to follow the S2F model's trajectory with remarkable fidelity. The 2017 bull run that took Bitcoin from $1,000 to nearly $20,000 aligned closely with model predictions. More impressively, the 2020-2021 cycle saw Bitcoin's price line hug the S2F prediction curve even as it climbed from $10,000 to $69,000.
This period of accuracy transformed the S2F model from a technical curiosity into a viral phenomenon. Charts showing Bitcoin's actual price (colored line) tracking the S2F model's dotted prediction line were shared endlessly across social media, lending scientific credibility to bullish outlooks. PlanB's monthly "worst-case scenario" updates became must-read content, with the analyst confidently asserting that Bitcoin would not fall below $98,000 by November 2021—a prediction that, in retrospect, marked the beginning of the model's credibility crisis.
Why It Seemed to Work
The model's success during this period wasn't coincidental. Bitcoin's four-year halving cycles did correlate with major price increases, and the post-halving supply reduction created genuine scarcity shocks. However, correlation does not imply causation, and the model's stunning visual fit masked fundamental statistical issues that critics would later expose.
During this period, PlanB refined the model multiple times. The original S2F model gave way to the S2FX (Cross-Asset) model, which grouped Bitcoin into different "clusters" based on its S2F ratio phases, comparing them to gold and silver markets. This expansion allowed for even higher price projections, with PlanB suggesting that Bitcoin could reach $288,000 by 2024 based on its transition to a higher S2F cluster comparable to gold's scarcity profile.
The model's popularity peaked during the COVID-19 pandemic when monetary stimulus drove Bitcoin adoption. Institutional investors like MicroStrategy and Tesla cited Bitcoin's digital scarcity as rationale for treasury allocations, implicitly validating the S2F narrative. For a brief moment, it seemed Bitcoin had found its valuation North Star.
The Breaking Point: When S2F Failed (2022-Present)
The S2F model's predictive facade cracked in late 2021. PlanB's November 2021 "worst-case" prediction of $98,000 failed to materialize, with Bitcoin closing the month around $57,000. This marked the first significant deviation, but worse followed. As 2022 unfolded, Bitcoin entered a devastating bear market driven by macroeconomic tightening, the collapse of Terra/Luna, and the bankruptcy of FTX.
- S2F Prediction: $100,000+ throughout 2022
- Actual Price: Collapsed below $16,000 in November 2022
- Deviation: ~85% below model prediction
- Model Status: Catastrophic predictive failure
The S2F model predicted Bitcoin should trade well above $100,000 throughout 2022. Instead, prices collapsed below $16,000, creating a deviation of nearly 85% from the model's predictions. This wasn't a minor variance—it was a catastrophic failure that rendered the model's short-to-medium term predictions meaningless.
The divergence persisted through 2023 and 2024. While Bitcoin recovered to $40,000-$70,000 ranges following the April 2024 halving, these levels remained 30-50% below S2F model predictions. By October 2025, with Bitcoin bouncing between $90,000-$122,000, the gap had become insurmountable. The S2F model projected $222,000-$420,000 for this period—targets that remained elusive even as Bitcoin reached new all-time highs.
This sustained, massive deviation has led many analysts to declare the model "broken" or "invalidated." The red box on S2F charts—highlighting the deviation period—has grown so large that it now dominates the visual representation, turning what appeared as a precise predictive tool into a cautionary tale about overfitted models.
The Fundamental Flaws: Why S2F Failed
The S2F model's failure wasn't random bad luck—it stemmed from fundamental conceptual and statistical errors that economists and statisticians identified even during the model's heyday. Understanding these flaws is crucial for evaluating whether the model retains any utility or should be discarded entirely.
1. The Demand-Side Omission: Economics 101
The most glaring flaw is the model's complete omission of demand. In any market, price emerges from the intersection of supply and demand. The S2F model analyzes only supply—specifically, the scarcity created by halvings—while assuming demand will remain constant or grow predictably. This is economically nonsensical.
Vitalik Buterin's Critique
Ethereum co-founder Vitalik Buterin famously criticized the model in June 2022, stating: "Stock-to-flow is really not looking good now. I know it's impolite to gloat and all that, but I think financial models that give people a false sense of certainty and predestination that number-will-go-up are harmful and deserve all the mockery they get."
The criticism cuts to the heart of the matter: Bitcoin's price depends on how many people want to buy it, not just how scarce it is. Diamonds are scarcer than water, yet water commands higher prices in most contexts because demand differs. The S2F model assumes that increasing scarcity automatically increases price, ignoring that demand can (and does) fluctuate dramatically based on macroeconomic conditions, regulatory developments, technological innovations, and market sentiment.
2. Statistical Invalidity: Spurious Correlation
Beyond theoretical flaws, the S2F model fails basic statistical tests. Econometrician Sebastian Kripfganz demonstrated that the model suffers from "spurious correlation"—a statistical artifact where two non-stationary time series appear related but lack genuine economic connection. When analysts run proper cointegration tests to determine whether the relationship between Bitcoin price and S2F ratio represents a stable, long-term connection versus coincidence, the S2F model fails.
3. Circular Reasoning
A more damning criticism involves circular reasoning. The S2F model uses Bitcoin's total market value (price × stock) as its dependent variable while using stock as an independent variable. Since stock appears on both sides of the equation (market value includes stock), the model essentially uses stock to predict itself—a statistical tautology rather than genuine predictive analysis.
4. Time-Dependence and Non-Stationarity
Kripfganz identified another critical issue: Bitcoin's halvings make the S2F ratio time-dependent rather than stochastic. Because halvings occur at predetermined intervals, the S2F ratio doesn't vary randomly based on market conditions—it follows a deterministic schedule. This time-dependence violates the statistical assumptions underlying the model's regression analysis, rendering its price predictions mathematically unsound.
The Institutional Era: Why S2F No Longer Applies
The market structure of 2026 differs fundamentally from 2019 when PlanB introduced the model. Institutional demand—via Bitcoin ETFs, corporate treasury holdings, and nation-state reserves—now outweighs the annual supply reduction from halvings by more than 7x, according to Bitwise analyst André Dragosch.
In this new paradigm, supply shocks matter less than institutional flows. When BlackRock's ETF accumulates 10,000 BTC in a week, that demand dwarfs the 3,125 BTC daily mining output. The S2F model, designed for an era when retail speculation and halving cycles drove price action, cannot account for institutional buying patterns, regulatory shifts, or the complex macroeconomic environment of modern Bitcoin markets.
The April 2024 halving demonstrates this disconnect. While the S2F model predicted massive price appreciation due to the halving-induced scarcity increase, actual price action was relatively muted compared to previous cycles. Bitcoin gained roughly 50% in the months following the halving—respectable, but far from the 300-500% gains seen in previous post-halving periods. The market had evolved; the model had not.
Alternative Models: Power Law and BAERM
As the S2F model has faltered, alternative frameworks have emerged with different assumptions and, arguably, better track records. Understanding these alternatives provides context for whether any model can reliably predict Bitcoin's trajectory.
| Model | 2026 Target | 10-Year Target | Key Assumption |
|---|---|---|---|
| S2F (PlanB) | $222,000-$420,000 | $10.9M | Scarcity drives price |
| Power Law | $210,000 | $1M (by 2033) | Network growth/time |
| BAERM | $173,000 | $7.6M | Autocorrelation + cycles |
| Actual (Jan 2026) | ~$95,000-$122,000 | TBD | Market reality |
The Power Law Model
Developed by astrophysicist Giovanni Santostasi, the Power Law model suggests Bitcoin's price follows natural scaling laws observed in physics, biology, and urban planning. Unlike S2F's focus on supply scarcity, Power Law tracks Bitcoin's growth as a function of time, with price scaling to the power of 5.8 relative to days since genesis.
The Power Law model predicted Bitcoin approaching $100,000 by January 2025—accurately matching actual performance. Its current projection calls for $210,000 by early 2026, followed by a retrenchment to around $60,000 later that year. Long-term, it sees $1 million by 2033—still ambitious but far more conservative than S2F's projections.
The BAERM Model
The Bitcoin Autocorrelation Exchange Rate Model (BAERM), introduced in 2023-2024, offers a more sophisticated quantitative approach. Rather than relying solely on supply metrics, BAERM accounts for Bitcoin's price autocorrelation—how today's price relates to historical prices—combined with halving epoch effects. The model currently estimates Bitcoin's "fair value" at $159,000.
2026 Analysis: Where Does S2F Stand Today?
As of January 2026, Bitcoin trades around $95,000-$122,000. The S2F model's prediction for this period ranges from $222,000 (conservative) to $420,000 (bullish)—meaning Bitcoin would need to double or quadruple from current levels to align with the model. This 50-70% deviation, persisting for over three years, represents a fundamental breakdown of the model's predictive capability.
The recent "death cross" formation (50-day moving average crossing below 200-day) and RSI readings suggesting neutral-to-weak momentum contradict the parabolic price increases the S2F model would require to "catch up" to its predictions. For Bitcoin to reach $500,000 by year-end 2025 as PlanB once projected, it would need to achieve percentage gains unseen since the earliest adoption phases—a mathematical impossibility given current market capitalization.
PlanB's Response and Community Sentiment
PlanB has defended the model by characterizing current prices as "absolutely undervalued" and maintaining that the "scarcity magnet" will eventually pull Bitcoin toward $250,000-$1 million. However, these predictions have shifted from specific monthly targets to wide ranges ($250K-$1M), effectively rendering them unfalsifiable.
The crypto community has divided between "S2F maximalists" who believe the deviation represents a once-in-a-cycle buying opportunity, and "post-S2F" analysts who view the model as charming history but irrelevant to future price action. Vitalik Buterin's critique resonates increasingly: models providing "false sense of certainty" are indeed harmful when they encourage leverage and risky investments based on predetermined price outcomes.
The Verdict: Is S2F Still Valid?
The evidence points to a clear conclusion: the Stock-to-Flow model, as originally formulated by PlanB, has lost predictive validity. The 2022-2026 period has demonstrated that Bitcoin's price responds to demand-side factors—institutional adoption, regulatory clarity, macroeconomic liquidity, technological development—that the S2F model completely ignores.
However, this doesn't mean scarcity doesn't matter. Halvings do create supply shocks that historically correlate with bull markets. The S2F model's single-variable focus was useful as a directional heuristic during Bitcoin's early adoption phase, when supply dynamics dominated price action. But as Bitcoin matures into an institutional asset with complex demand drivers, models must evolve beyond supply-side reductionism.
For Investors: Context, Not Certainty
The S2F model's legacy isn't worthless—it correctly identified Bitcoin's programmed scarcity as a core value proposition. But investors should view it as one tool among many, not a crystal ball. The model's failure teaches a crucial lesson about financial markets: any model claiming to predict prices with certainty based on a single variable will eventually fail, because markets are complex adaptive systems influenced by countless interconnected factors.
- S2F has failed as a short-to-medium term predictive model
- Price is driven by demand (institutional flows, regulation, macro), not just scarcity
- Use multiple analytical frameworks—no single model captures market complexity
- Scarcity creates potential for appreciation; demand determines if that potential is realized
- The model's "worst-case scenarios" have been consistently wrong since 2021
Current alternative models—Power Law, BAERM, on-chain analysis, and fundamental valuation frameworks—offer more nuanced perspectives but share the same limitation: they describe historical patterns that may not persist. The only certainty in Bitcoin investing is uncertainty.
As we navigate 2026, the question isn't why S2F failed, but what we've learned from its failure. The answer is humility: respect markets as complex systems, diversify analytical frameworks, and never bet the farm on any single model—even one with a beautiful chart and millions of followers. Scarcity creates potential for value appreciation, but demand determines whether that potential becomes reality. Ignore either at your peril.
This analysis is for educational purposes only and does not constitute financial or investment advice. All price prediction models, including those discussed here, have significant limitations and poor track records of accuracy. Bitcoin and cryptocurrency investments carry substantial risk of loss. Past performance of models does not guarantee future results. Always conduct your own research and consult qualified financial professionals before making investment decisions.