What Bitcoin Did

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Could Bitcoin Really be Heading to $288k? With Plan₿

Peter McCormack

Interview | Description | Timestamps | Show Notes

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Could Bitcoin Really be Heading to $288k? With Plan₿ - WBD219 Peter McCormack

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Location: Zoom
Date: Wednesday 29th April
Project: Independent Trader
Role: Bitcoin Quant Analyst

Plan₿'s Stock-to-Flow model was warmly received by many in Bitcoin. The chart gave context to price action around halvings, validating the importance of scarcity. The S2F model does have critics, and with the third halving approaching, some had questioned whether the reducing subsidy drive price.

The halving is one of the most significant events in the Bitcoin calendar. Every 210,000 blocks (~4 years) the block subsidy issued to the miners reduced by half. Initially, the block reward was 50BTC, now 11 years later on approximately May 12th, we will have the 3rd halving taking the block reward from 12.5BTC to 6.25BTC. By the end of this reward period on May 12th, 87.5% of all Bitcoin will have been mined.

Satoshi implemented the halving as a way of controlling inflation, front-loading the rewards to kick start the protocol. Dan Held stated that halvings  are a viral marketing loop which creates awareness.

Historically, the Bitcoin price in the weeks and months following the halving has seen significant moves to the upside, with supply cut in half Bitcoin becomes more scarce and demand may increase. 

The Stock-to-Flow model tracks the scarcity of an asset and following the halving the stock to flow ratio of Bitcoin will rise from 25 to 50, meaning it would take 50 years for miners to mine enough Bitcoin to match the current Bitcoin supply, at the current level of issuance. When applied to non-digital assets such as gold and silver, stock-to-flow becomes a benchmarking tool. 

Plan B identified a flaw in the model, the overreliance on time. In the latest version of his model, Bitcoin Stock-to-Flow Cross Asset Model (S2FX), time is removed, and other assets such as gold and silver are added. The new model includes a significant change, Phase Transitions, which identifies that the properties of an asset can change. These changes in the properties of Bitcoin, for example maturing from digital cash to digital gold, identify why the market for the asset grows; thus, there is increasing demand.

In this interview, I talk to Bitcoin Quant Analyst & creator of the popular stock to flow model, Plan₿. We discuss his new S2FX model, the upcoming Bitcoin halving, predicted price action and the impact on miners.

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00:04:25: Introductions
00:05:22: Background behind Plan₿’s work
00:08:52: What is stock to flow?
00:13:26: Criticisms around the first model
00:15:21: Inspiration for revisiting the model
00:19:22: Model phase transitions
00:24:17: Time series into phases
00:25:27: Future 5th phase
00:28:08: Benefits of phase transitions
00:30:48: Reading the model
00:32:19: Data points and clusters
00:35:38: Model permutations
00:38:44: State owned Bitcoin
00:44:03: Model phase transition ranges
00:47:53: What kills the model
00:49:18: Should we rely on models?
00:56:53: Mapping other data onto the model
00:58:16: Range predictions for price
01:01:08: Final comments

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