Stock-to-Flow Ratio and Power-Law Model

What is "Stock-to-Flow Ratio in USD"?

Stock-to-Flow is a valuation model based on the assumption that an asset’s scarcity influences its value. The indicator is calculated as the ratio of the current circulating supply of Bitcoin to its annual production and is compared with the Bitcoin market price expressed in US dollars.

Why is "Stock-to-Flow Ratio in USD" important?

The ratio reflects Bitcoin’s scarcity by comparing the existing supply with the rate of new issuance. Because Bitcoin issuance is programmatically limited and decreases through halvings, the indicator is used to analyze long-term supply dynamics and its potential impact on market valuation.

How is "Stock-to-Flow Ratio in USD" calculated?

The ratio is calculated as:

Сirculating BTC supply / annual BTC production.

What is "Power-Law Model"?

Power-Law Model is a mathematical model describing the long-term historical relationship between the Bitcoin price and the time since its inception. The model assumes price dynamics can be approximated by a power function of the number of days since network launch.

Why is "Power-Law Model" important?

The model enables quantitative description of Bitcoin’s historical growth trajectory and assessment of how far the current price deviates from the long-term power-law trend. In retrospective fitting, the model shows a high level of correlation between time and price.

At the same time, its use for forecasting is limited because it is based solely on historical data and does not account for the stochastic nature of financial markets.

How is "Power-Law Model" calculated?

The model is constructed by fitting a power function to historical Bitcoin price data as a function of time. Time is represented as the number of days since network launch, and model parameters are determined empirically based on the selected historical data range.

Data source

Metrics displayed across crypto fundamentals are powered by third-party data providers, which may include Glassnode, Coinmetrics, LunarCrush, and DefiLlama. The specific provider or combination of providers behind any given metric may vary.