PlanB has launched a new S2FX Model, a year after publishing the first stock-to-flow model.
With this new model, the analyst is solidifying the basis of the S2F model. In this Model, PlanB is removing time and adding other assets like silver and gold to form a new model called the BTC S2F cross asset model.
As for going with this new model, the analyst explained that weekly or daily data added noise but monthly data “is the real signal.” Also, instead of using one formula for bitcoin and other for the precious metals, now all three assets are valued with one formula. This new model also has phases and cluster centers do not move.
As per this new model, BTC’s S2F will be 56 in 2020-2024 which puts the value of bitcoin at $5.5 trillion and the price of one BTC at $288,000.
This price projection is higher than the $55k as per the original model. But the analyst said he values the results of the S2FX model relevant because of the high significance of F, low p-Values, and high R2. Aso, due to the non-spurious S2F-price relationship and co-integration in time series analysis.
In his latest analysis, PlanB said this model is a new way of thinking about BTC transitioning into a new phase.
Phase transitions he explained are important in understanding the S2FX model because they are often discontinuous and during phase transitions, altogether different properties are achieved. For instance, water has four phases — solid, liquid, gas, and ionized.
When it comes to money, the US Dollar went through different phases as well, first a gold coin from which it transitioned to paper backed by gold then to the current form a paper backed by nothing.
And the same is true of bitcoin. Combining bitcoin’s narratives with the financial system, we get four phases — “Proof of concept” after Bitcoin white paper, “Payments” after USD parity, “E-Gold” after first halving that got almost gold parity, and “Financial asset” after second halving.
In this new Model, these phase transitions are quantified by minimizing the distance between the monthly BTC data and clusters.
This gives us BTC “Proof of concept” with an S2F 1.3 and market value of just $1 million which is a totally different asset than the current BTC “Financial asset” which has an S2F 25 and market value of $114 billion.
Now, adding Silver that has an S2F of 33.3 and the market value of $561 billion and gold with S2F 58.3 and over $10 billion market value, they form a straight line.
The BTC S2F Cross Asset (S2FX) Model uses the regression analysis, unlike the original S2F model. This new model also found a significant relationship between S2F and the market value of all the assets with a perfect fit (99.7% R2).