What is the significance of Bitcoin's "Stock-to-Flow" model in its long-term price predictions?

What is the significance of Bitcoin's "Stock-to-Flow" model in its long-term price predictions?

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Bitcoin's "Stock-to-Flow" (S2F) model is a popular analytical tool used by some proponents to predict its long-term price, and its relevance continues to be debated in relation to the bitcoin price today. The S2F model posits that Bitcoin's value is derived from its scarcity, specifically comparing its existing supply (stock) to the rate at which new Bitcoin is produced (flow). Historically, the model has shown a strong correlation with Bitcoin's price movements, particularly after each halving event where the "flow" is cut in half, increasing scarcity. While not without its critics who point to its simplicity and inability to account for all market dynamics, the S2F model provides a long-term framework for understanding Bitcoin's value proposition based on its programmatic scarcity. Many long-term investors use it as a guiding principle, believing that as Bitcoin becomes even scarcer post-halving, its price is destined to continue appreciating towards the model's projected targets.