stock to flow
Stock-to-flow is a ratio that measures how much of a commodity exists in total stock relative to how much new supply is produced each year, used to quantify scarcity.
Stock-to-flow is a concept borrowed from commodity analysis, originally used to evaluate the scarcity of precious metals like gold and silver. The stock refers to the total existing supply of an asset. The flow refers to the amount of new supply added each year through production or mining. Dividing the stock by the flow gives the stock-to-flow ratio: a higher number means it would take more years of current production to replicate the existing supply, implying greater scarcity. Gold has historically had a very high stock-to-flow ratio because it is nearly indestructible and accumulates over centuries, while newly mined gold each year is a small fraction of total above-ground supply.
Bitcoin's stock-to-flow ratio increases with each halving because the flow (new block reward) is cut in half approximately every four years while the stock continues to grow. Before the 2024 halving, around 900 new bitcoin were produced daily. After the halving, that dropped to roughly 450. As the stock grows and the annual new supply shrinks, the ratio rises. A pseudonymous analyst known as PlanB popularized the stock-to-flow model for Bitcoin around 2019, arguing that Bitcoin's scarcity, quantified by this ratio, correlated historically with its market value.
Stock-to-flow is a descriptive framework for understanding Bitcoin's supply mechanics, not a price prediction tool. The model attracted significant attention during periods when its forecasts appeared to match price movements, and equal skepticism when they diverged. Critics point out that a model based solely on supply-side mechanics cannot account for demand, adoption, regulation, or market sentiment, all of which influence price significantly. CanoeBit presents stock-to-flow as an educational concept about Bitcoin scarcity, not as investment guidance.