- Bitcoin’s stock-to-flow may surpass gold as per Fidelity’s latest report.
- Although Bitcoin’s popularity has soared, its demand painted a contradictory picture.
You have probably heard of the popular Bitcoin [BTC] stock-to-flow model. Well, it is back in the headlines thanks to a new Fidelity report, and perhaps it might be worth lending some attention.
How many are 1,10,100 BTCs worth today
One of the major takeaways from the Fidelity report was that Bitcoin’s stock-to-flow ratio might surpass that of gold. It did not offer an accurate prediction but it suggested it as a likely outcome after the next Bitcoin halving.
From a Fidelity report on the case for Bitcoin:
After the upcoming halving in ~8 months, Bitcoin will have a higher stock to flow ratio than Gold pic.twitter.com/csd6hsn4cR
— Will Clemente (@WClementeIII) July 25, 2023
So, what does it mean for Bitcoin to have a higher stock-to-flow ratio than Gold? Well, the stock-to-flow ratio assesses the ratio of the existing supply and new production or incoming supply. In other words, it is used to highlight the level of scarcity.
Scarcity determines value
The report suggested that Bitcoin will be more scarce than gold after the 2024 Bitcoin halving. This could be a major turning point as far as demand is concerned. The report further pointed out demand drivers that highlight Bitcoin’s appeal. Some of those reasons were inflation, growing money supply, central bank, and government intervention.
We have already seen significant regulatory intervention this year but there was one unexpected factor that has been shortlisted. According to the report, low-interest rates might also be a factor. So far higher interest rates have had a significant impact on the price of BTC and this will continue well into the future.
The PlanB’s infamous stock-to-flow model has been the victim of scrutiny in the past for not being as reliable as expected. As such, there might be some friction against this new S2F prediction. There are many factors to consider that may have an impact on Bitcoin especially in the near term.
So far the regulatory landscape is still foggy, hence the outcome might still be a toss-up. However, it is clear that Bitcoin’s popularity has grown to levels where governments cannot ignore it.
Is BTC recovering then?
Despite the nature of the aforementioned information, demand for the king of cryptocurrencies was still low. The level of open interest in BTC was still significantly lower than it was during the 2021 bull market. Nevertheless, its demand in the derivatives market was growing.
Source: CryptoQuant
Read Bitcoin’s [BTC] price prediction 2023-24
Bitcoin’s estimated leverage ratio has been on the rise from its lowest point this year. While it may not necessarily be an accurate yardstick for measuring demand, it highlights the recovering confidence in BTC’s future.