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Is Bitcoin outshining gold?
@saifedean introduced the stock-to-flow approach to Bitcoin. It serves to quantify the “hardness” of an asset. We took the quantitative model of @100trillionUSD (using Bitcoin’s stock-to-flow ratios to explain its market value) for a spin ours elves.👇
@saifedean introduced the stock-to-flow approach to Bitcoin. It serves to quantify the “hardness” of an asset. We took the quantitative model of @100trillionUSD (using Bitcoin’s stock-to-flow ratios to explain its market value) for a spin ours elves.👇
From a purely econometric point of view, the model is very solid.
However, when it comes to making forecasts on the basis of this model, we would counsel caution. Even the best statistical model can fail miserably when seeking to predict the future. A major challenge for the stock-to-flow model is the next Bitcoin halving in 2020.
Nevertheless, the stock-to-flow approach is a good heuristic for understanding Bitcoin. It becomes clear that Bitcoin is designed as an ultra-hard type of money. Next year, it will already exhibit a similarly high degree of hardness as gold.
One of our key insights: Whereas gold has had to earn its high stock-to-flow ratio “the hard way“ over the course of millennia, Bitcoin’s purely digital character enables “supply engineering,” which causes the stock-to-flow ratio to rise at a breakneck pace.
