# Key Lessons from *Bitcoin Stock-to-Flow (S2F) Model* and *Bitcoin Stock-to-Flow Cross Asset (S2FX) Model* by PlanB

## 1. Stock-to-Flow Ratio (S2F) and Bitcoin's Scarcity
- **Lesson**: The Stock-to-Flow (S2F) model evaluates an asset’s scarcity by comparing the stock (existing supply) to the flow (newly produced supply). Bitcoin’s fixed supply and halving cycles make its stock-to-flow ratio increase over time, enhancing its scarcity.
- **Example**: Gold has a high S2F ratio due to its large existing supply relative to new production. Bitcoin’s S2F ratio increases significantly after each halving, reducing new supply and mimicking gold’s scarcity features.

## 2. Bitcoin's Value Based on Scarcity (S2F)
- **Lesson**: The S2F model posits that Bitcoin's value is primarily driven by its scarcity. As Bitcoin’s supply flow diminishes due to the halving events, its value is expected to rise. The model suggests that higher S2F ratios correspond to higher asset valuations.
- **Example**: After the 2020 halving, Bitcoin’s S2F ratio increased to around 56, which PlanB’s model predicted would push Bitcoin’s price toward $100,000 by 2024.

## 3. S2FX Model: Bitcoin as a Cross-Asset
- **Lesson**: The S2FX model extends the original S2F by comparing Bitcoin’s transition from a collectible to a financial asset alongside other assets like silver and gold. It models Bitcoin's progression through different monetary phases based on historical S2F ratios of other assets.
- **Example**: According to the S2FX model, Bitcoin is currently in the early stages of maturing into a financial asset comparable to gold, with the potential to reach much higher valuations as it progresses through the phases.

## 4. Predicting Market Cycles with S2FX
- **Lesson**: The S2FX model uses historical data to predict future Bitcoin price movements by aligning Bitcoin’s maturation with market cycles experienced by other assets like gold and silver. Each phase shift leads to new pricing regimes for Bitcoin.
- **Example**: The model predicts that Bitcoin will follow a price trajectory similar to the adoption of silver and gold. As Bitcoin matures into a global reserve asset, the S2FX model estimates potential future valuations above $288,000.

## 5. Limitations of S2F and S2FX Models
- **Lesson**: While the S2F and S2FX models provide frameworks for understanding Bitcoin’s valuation, critics argue that the models rely heavily on scarcity alone, without considering other factors like demand shocks, regulatory impacts, or technological advancements.
- **Example**: In periods of extreme regulatory pressure or black swan events (e.g., China’s crackdown on Bitcoin mining), Bitcoin’s price may deviate from the predictions of the S2F model.
# Key Lessons from *Modeling Bitcoin Value with Scarcity* by PlanB

## 1. Bitcoin's Scarcity and Stock-to-Flow (S2F) Model
- **Lesson**: The Stock-to-Flow (S2F) model measures an asset's scarcity by comparing the existing stock of the asset to its annual production (flow). Bitcoin’s scarcity increases over time due to its fixed supply cap and halving events, which reduce the new supply.
- **Example**: Gold has a high stock-to-flow ratio due to its large existing supply and slow production rate. Bitcoin’s S2F ratio increases after each halving, making it more scarce over time. This scarcity is expected to drive higher valuations as new supply diminishes.

## 2. Predicting Bitcoin’s Price Using the S2F Model
- **Lesson**: PlanB’s S2F model posits that Bitcoin’s value can be predicted based on its increasing scarcity. The higher the S2F ratio, the higher the predicted price of Bitcoin. The model uses past data to estimate future price increases as Bitcoin’s new supply decreases.
- **Example**: After Bitcoin’s halving in 2020, the S2F model predicted that Bitcoin’s price could reach $100,000 or more by the next halving cycle in 2024.

## 3. Market Phases of Bitcoin
- **Lesson**: Bitcoin's development can be divided into distinct market phases: collectible, investment, and store of value. Each phase corresponds to Bitcoin’s evolving utility and increasing price as it gains wider adoption.
- **Example**: In its early years, Bitcoin was viewed primarily as a collectible with speculative value. As its use cases expanded, it transitioned into an investment vehicle and is now seen as a store of value, similar to gold.

## 4. Limitations and Criticism of the S2F Model
- **Lesson**: While the S2F model has been accurate in predicting some of Bitcoin’s price movements, it has limitations. Critics argue that it focuses solely on scarcity and ignores other factors such as demand shocks, market sentiment, or regulatory changes that can affect Bitcoin's price.
- **Example**: In 2021, Bitcoin’s price did not strictly follow the S2F model’s prediction, highlighting the influence of external factors like China’s mining ban and increased regulatory scrutiny.

## 5. Bitcoin as Digital Gold
- **Lesson**: Bitcoin is increasingly being compared to gold due to its scarcity and function as a store of value. The S2F model highlights Bitcoin’s potential to surpass gold in terms of scarcity, positioning it as "digital gold" in the long term.
- **Example**: Bitcoin’s fixed supply of 21 million coins makes it even scarcer than gold, which continues to be mined. This fixed supply contributes to its attractiveness as a hedge against inflation.

# Key Lessons from *Modeling Value Based on Scarcity*

## 1. Scarcity as a Driver of Value
- **Lesson**: Scarcity is one of the fundamental drivers of value. Assets that are difficult to produce or have a limited supply tend to increase in value over time, as demand outstrips supply. This principle underpins the valuation of Bitcoin.
- **Example**: Gold’s value has historically been supported by its scarcity and the difficulty involved in mining it. Similarly, Bitcoin’s fixed supply cap of 21 million coins contributes to its increasing scarcity as more are mined.

## 2. Stock-to-Flow (S2F) Model in Valuing Bitcoin
- **Lesson**: The Stock-to-Flow (S2F) model is used to quantify scarcity by comparing an asset’s total existing supply (stock) to the amount of new production (flow). Bitcoin’s value can be predicted based on its increasing scarcity, as each halving event reduces the new supply entering the market.
- **Example**: After Bitcoin’s halving in 2020, the S2F ratio increased, suggesting a corresponding increase in Bitcoin’s value due to the reduction in new coins being mined.

## 3. Predicting Price Movements with S2F
- **Lesson**: The S2F model suggests that as Bitcoin’s stock-to-flow ratio increases, its price should rise accordingly. This model has been used to predict long-term price movements by aligning Bitcoin’s scarcity with other commodities like gold and silver.
- **Example**: The S2F model predicted a price increase for Bitcoin leading up to 2024, with estimates suggesting that the price could exceed $100,000 due to the halving event and subsequent scarcity.

## 4. Comparing Bitcoin to Gold
- **Lesson**: Bitcoin is often compared to gold as a store of value due to their shared scarcity characteristics. Both assets have limited supplies, but Bitcoin’s supply is fixed, whereas gold continues to be mined. This fixed supply gives Bitcoin a potential advantage over gold in terms of scarcity and value growth.
- **Example**: Gold has a stock-to-flow ratio of approximately 60, meaning that its annual production is only a small fraction of its total existing stock. Bitcoin’s S2F ratio is expected to surpass gold’s after future halvings, further cementing its role as "digital gold."

## 5. Limitations of the Scarcity Model
- **Lesson**: While scarcity is a key driver of value, the S2F model does not account for external factors such as market sentiment, technological developments, or regulatory changes that can influence Bitcoin’s price. As such, it is not a definitive predictor of value.
- **Example**: The price of Bitcoin has deviated from S2F model predictions during periods of regulatory uncertainty or market downturns, indicating that other factors also play a role in its valuation.
# Key Lessons from *The Halving: Trends & Implications of Bitcoin's Supply Inflation Mechanism* by Kraken Intelligence

## 1. Bitcoin’s Supply Mechanism: The Halving
- **Lesson**: Bitcoin's supply is strictly limited to 21 million coins, and its growth is regulated through an event called "the halving," which reduces the block subsidy by 50% every 210,000 blocks (approximately every four years). This halving event is a critical part of Bitcoin's disinflationary monetary policy.
- **Example**: The next halving is expected to take place at block 630,000, cutting the block reward from 12.5 bitcoins to 6.25 bitcoins, reducing the annual supply growth rate from 3.72% to 1.79%.

## 2. Historical Impact of Previous Halvings
- **Lesson**: Previous halvings have been followed by significant bull runs, where Bitcoin's price surged before and after the events. However, these bull runs were also followed by drawdowns, indicating high volatility surrounding halving events.
- **Example**: After the first halving in 2012, Bitcoin's price increased by over 50,000%, but eventually saw an 80% drawdown by 2013. Similarly, after the second halving in 2016, Bitcoin's price peaked at nearly $20,000 before dropping 83% by 2018.

## 3. Stock-to-Flow Ratio and Scarcity
- **Lesson**: Bitcoin's scarcity is often compared to commodities like gold, using the stock-to-flow (SF) ratio to measure its supply. Bitcoin’s SF ratio is set to surpass gold’s after the fourth halving in 2024, making it an even scarcer asset.
- **Example**: Gold has an SF ratio of around 60, while Bitcoin’s SF ratio will climb higher after future halvings, positioning it as a stronger store of value compared to gold.

## 4. Impact on Miners
- **Lesson**: The halving directly affects miners by cutting their block rewards, which reduces their revenue by about 50%. This creates a challenging environment, especially if Bitcoin’s price does not increase proportionally to offset the revenue loss.
- **Example**: At the time of the 2020 halving, miners were expected to see their annual revenue drop from $6.1 billion to $3.1 billion, unless the price of Bitcoin increased or transaction fees compensated for the loss in block rewards.

## 5. Future of Transaction Fees
- **Lesson**: As block subsidies continue to decrease with each halving, transaction fees will need to play a larger role in compensating miners. The question remains whether transaction volumes or fees will increase sufficiently to maintain the security and profitability of the network.
- **Example**: For miners to maintain revenue post-halving, transaction fees would need to increase by 19.7x, or daily transaction volume would need to rise significantly to offset the decline in block subsidies.