The frenzy around Bitcoin has been waning, triggering a certain level of skepticism among fanatics and observers alike. Yet despite this ebbing enthusiasm, the stock-to-flow model, popularly posited by PlanB, continues to hold firm traction within the community.
Bitcoin‘s current struggle to maintain its position above the critical $30,000 mark is consistent with analysts’ projections of choppy accumulation spanning over the next few months. The thrilling surge that took Bitcoin to a new peak just over $31,800 on July 13, fueled by the prospect of exchange-traded funds (ETFs) approval in the US and Ripple’s significant legal victory over the U.S. Securities and Exchange Commission (SEC), has faded. Five days later, the king of cryptos closed below $30,000, leaving buyers scrambling to keep it above the essential support level.
Nevertheless, historical on-chain activities and empirical data suggest that the nightmarish bear market days are behind us. Long-term holders are seemingly unscathed, exuding an unruffled demeanour, while their short-term counterparts pose a potential risk by selling.
Glassnode’s recent report reveals that Bitcoin‘s price action during 2023’s first half was largely plugged by short-term investors. This group (representing 88% of the short-term holder’s supply), according to Glassnode, is increasingly likely to spend and take profit. The profits of short-term holders inflated significantly from $25,000 after BlackRock’s ETF filing provoked buyers’ optimism.
Interestingly, long-term investors maintained their stoic stand against selling despite the price spike dominating the first half of 2023. The distinctive difference in profit booking levels between bull-run periods and current market conditions is reflected in the net realized profit/loss metric.
PlanB’s Stock-to-Flow (S2F) model paints a picture of the positive price implications of Bitcoin’s halving. This model suggests that an asset’s price grows as its availability shrinks. Gold, for instance, has a stock-to-flow ratio of around 62, meaning it would take nearly 62 years to get the total amount of gold in existence from newly mined coins.
Despite its skeptical reception, as Bitcoin failed to reach the model’s projected $100,000 target during the last cycle, analyst Jesse Myers asserts that its first version from 2019 predicted a Bitcoin price of $55,000 post-2020 halving.
Anticipating another supply shock at the next halving event in April 2024, the S2F model proposes that prices are likely to soar following this event. Whether the road leads to a speculative frenzy that drives prices even higher, or a more modest version of the model becomes reality, the main point of contention lies in the delicate balance between short-term vulnerabilities and long-term price stability.
Source: Cointelegraph
