The world’s largest cryptocurrency recently breached another key resistance, with Bitcoin crossing the $10,000 mark for the first time in about 15 months. It has also recouped half of its valuation from its all-time high of $19,511 in December 2017. The crypto-community has been left in awe over the past few months as Bitcoin witnessed a “fairly extraordinary bounce,” according to George McDonaugh, CEO and Co-Founder of KR1, a crypto-investment firm.
A majority of the community has suggested that the latest surge happened on the back of Facebook announcing the Libra coin, while others believe it was market FOMO that pumped the price.
One key index which the community has actively followed over the past one month is the Stock-to-Flow Model.
According to the above chart, it can be observed that Bitcoin is currently ahead of the Stock to Flow model price for BTC. According to the S2F model, Bitcoin was supposed to consolidate below the $10,000 mark till 2020, following which, it was primed for a massive surge to $60,000. The index has been fairly accurate with BTC valuation over time and the fact that Bitcoin conforms to this index suggests that the monetary premium attached to Bitcoin is very real.
It was also highlighted that the S2F model of Bitcoin was likely to replicate the one of Gold, once the Bitcoin halving was over.
However, the recent deviation in prices gave fuel to several arguments in the space and it was suggested that the S2F model’s exponential rate of growth was inclined and driven by the mathematical aspect of Bitcoin’s monetary policy. It was suggested that such a prediction was based on a lot of variables and was difficult to correctly predict.
The Stock to Flow model gives Bitcoin real monetary value and its increasing S2F numbers reduced its chances to record inflation.