In recent years, the stock flow model proposed by Scheme B has become very popular. A quantitative study model and forecasts posted on planbtc.com show that Bitcoin (BTC) could reach $ 100 trillion. Obviously, the cryptocurrency industry, including me, is influenced by the logic of this model and it is believed that it could reach $ 100,000 in early 2021.

In fact, the stock flow model assumes that there is a correlation between the amount of precious metals mined each year (flow) and the amount already mined (stock).

For example, the gold bond is only less than 2% of the gold traded annually (in the hands of central banks and individuals). At current mining speeds, stocks worth more than 50 years have been circulating, making gold a rare commodity.

PlanB assumes that Bitcoin, considered by many to be digital gold, could follow this relationship between traffic and mining volume this year and proposes a Cartesian aircraft (X-axis) and the Y-axis are both logarithmic axes, in which the Bitcoin extension is more often followed by an extension that can be described as a regression line (using the power law formula).

Returns received every four years or more are due to the expected yield of one or half of each mining block. The Bitcoin protocol states that for every 210,000 blocks, the number of Bitcoins allocated to each block must be subtracted from those for cryptographic testing.

Related: Using Quantitative Models to Predict Bitcoin Prices, Part 2

Perhaps when Satoshi Nakamoto thought about what was happening today, he realized that the price would go up every four years. At the same time, PlanB showed that in the first 10 years of history, Bitcoin moved around a significant return, which means that for each half, the price will increase six times instead of twice.

Reason # 1

The first reason is this: Can we really assume that the value of Bitcoin will reach $ 1 billion around 2039?

One billion per Bitcoin means that the market value will reach about $ 20,000 trillion, which is “only” 130 times the current market value of the stock. In addition, in the coming years, according to this model, costs are expected to increase tenfold.

Obviously, this is unbelievable, especially for the next two points.

Reason number 2

The second reason is that the model does not address demand but only reduces it. Bitcoin is no longer the only cryptocurrency in circulation. As many emerging projects inevitably grab people’s attention (and investment) in digital gold, their dominance is coming to an end.

In fact, this is especially true because the impact of demand is not taken into account because the stock flow model is imperfect. If people want to buy, they are worth less assets. The painting of an unknown artist, although it may be beautiful, although it has many collections of paintings, is useless if it is not interested in anyone who wants to own it.

A few months ago, I discussed this in my article, when I suggested instead of reducing based on the Bitcoin forecasting model. According to this model, in order for Bitcoin to reach $ 1 billion, it takes about 4 trillion wallets to launch – which is quite unbelievable in a scenario.

Related: Using Quantitative Models to Predict Bitcoin Prices, Part 3

Reason number 3

The third reason comes from the construction of the flow from the stock.

If we do not go back to the beginning until today, but assume that we return at the end of each period before halftime, then the return will always be different.

If we calculate the stock flow at the end of the first half of the year, it is predicted that the global diamond capital will reach the end of September 2016. However, at the end of the second half of August 2016, the regression line showed that the Bitcoin capital will reach its level gold capital in 2021, and we are still tenth of that.

Related: Using Quantitative Models to Predict Bitcoin Prices, Part 4

Therefore, the path to Bitcoin may not be a straight line proposed by PlanB with a double logarithm at the Cartesian level, but a curve (the mathematical explanation has not yet been studied), which is flat over time. Efficiently. General Chat Chat Lounge The most optimistic prediction of the stock flow model proposed by Scheme B is incorrect.

This article does not include investing tips or recommendations. There are risks involved in