The Stock-to-Flow (S2F) indicator measures Bitcoin’s scarcity by comparing its circulating supply (stock) to its annual new issuance (flow).
Each halving reduces new supply, making Bitcoin scarcer.
The model links scarcity to long-term price trends.
It is used to evaluate valuation, cycles, and market behavior.
1. Understand the Concept
Formula: S2F = Stock (circulating supply) ÷ Flow (annual issuance).
Halvings matter: Every halving cuts supply issuance, pushing the S2F ratio higher.
Why it matters: Assets with higher S2F (like gold) are scarce and often more valuable.
2. Interpret the Stock-to-Flow Indicator
Gray step line: The S2F model projection, rising after each halving.
Colored dots (BTC Price): Show the actual price, colored by months/days until next halving (red = far, blue = near).
Deviation: If price is above the line → possible overheated market.
If price is below the line → potential undervaluation.
3. Analyze Historical Patterns
Price cycles: Bitcoin tends to oscillate around the S2F line.
Bull markets: Price often overshoots far above the model.
Bear markets: Price tends to dip below the model.
Error line (white dotted): Tracks the degree of deviation, helping identify extremes.
4. Make Decisions
Below the S2F line: Historically a good accumulation zone.
Above the S2F line: Indicates potential overvaluation and risk of correction.
Halving awareness: Expect shifts after halvings as new scarcity drives trends.
Use with other data: Always combine S2F with demand metrics (e.g., active addresses, transaction counts).
Combine with demand-side indicators for a complete picture.
Track deviations using the error line to spot overbought/oversold conditions.
Focus on halvings — they are the main drivers of shifts in the S2F ratio.
Use logarithmic scale charts to better visualize exponential growth.
Compare with history to spot recurring patterns across cycles.
Last updated