What is the Stock To Flow Model for Bitcoin?

There’s been much talk in the past two years about the Stock to Flow model. And even more people should know about it. Here’s how I understand it in simple terms:

Satoshi Nakamoto programmed Bitcoin to increase in difficulty, to harden when there are many miners after the next bitcoin, and programmed it to halve the payout of Bitcoin every 4 years, and finally but most importantly, programmed it to stop at 21 million Bitcoin total. The last bit can never actually be reached, it’s asymptotically a hard limit in mathematics, but still a limit.

Now, Saifedean Ammous, the author of The Bitcoin Standard posted this plain-looking tweet:

I’m mirroring it in case something happens.

Now, you see this is a solid scaling model. It’s even too plain, to be honest. But that’s programming for you, it produces the expected results. This picture is not that impressive, so let’s superimpose the model on historical data:

That last blurry bit is the amazing part. It clearly shows that the predicted price, the light-blue ribbon, and the actual price of Bitcoin are aligned. There have been deviations over the years, and Bitcoin is still very volatile. But even with this volatility its price is still within a predicted band of prices.

In simple terms, the stock-to-flow model seems to predict the price of Bitcoin accurately.

And the stock-to-flow model shows a price of 1.000.000 USD per bitcoin as we close to 2026.

If this doesn’t convince you to invest in Bitcoin, I don’t know what will.

But what do the numbers actually mean?

Well, let’s make an analogy. Let’s forget about the digital part of the digital gold and let’s call it just gold. Imagine if there were only 21 million bars of gold in the entire Earth. Pure, 99.99% bullion gold. 21 million kilograms and nothing more, not even a single gram to be found. That’s how hard the limit is.

And imagine if somehow, by magical means, the harder people dug for gold it somehow played a game of cat and mouse and hid away, getting always out of reach, gold veins running out etc. On average, it would mean that the same amount of gold could be dug no matter how big the gold rush was and how many people tried to mine more of it.

And imagine, and this is the hardest part, that every 4 years the amount of gold you can dig up is exactly halved. Like exactly, down to the gram. Yesterday you were digging up 1 kilogram of gold, now it’s 0.5 kilograms. Same equipment, same workers, same gold vein, same everything. It’s insane, I know. Bear with me.

All these magical properties are impossible in the real world, but they are relatively easy to program. And that’s what’s in Bitcoin’s DNA. The difficulty, the halving, the hard limit in the amount of bitcoins.

Now, as a store-of-value, this type of gold has a specific price. Since people want it as currency, the demand is higher and the price goes up. And imagine if you could predict the price of this weird gold with stunning accuracy and with little deviation.

Now, wouldn’t you invest in this type of gold?

You can invest in Bitcoin, which is the next best thing to magic.