Steemit Crypto Academy Contest / S15W2 - Stock to Flow Model.
Hello Steemians!
1.- Explain in your own words the Stock to Flow Model, what is its function?
In my own words the "Stock to Flow Model, is a method that is used to quantify, and check the scarcity supply of Bitcoin and other cryptocurrencies. Stock to Flow Model is mainly used for assessing (knowing) the value of Bitcoin which is focused on two key concepts such as; the concept of Stock and Flow.
The Concept of Stock: means the total amount of Bitcoin that is currently available in circulation.
The concept of Flow: This means the rate at which a new supply of Bitcoin is mined in yearly, monthly, or weekly.
The graph on the stock-to-flow line is the forecasted price for bitcoin at that particular time. By hovering your cursor over the line on the chart, you can see the forecasted price as shown below.
Now, if the amount of Bitcoin that is mined is reduced, it means supply will be reduced and demand will be high on the market. In simple words, it means the Stock to Flow Model is what is used to predict the future rise of Bitcoin and other commodities.
In other to calculate the stock Flow Ratio you will have to divide the current supply of Bitcoin, by the annual mined Bitcoin. In doing this when you see a higher ratio, it means Bitcoin is more scarce in the market, and more value is in Bitcoin.
| Function |
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One of the functions of the stock to flow Model is forecasting using the tool to identify where the price of Bitcoin or other currency will go in the future. It helps traders and Investors to know the future movement of Bitcoin such as how valuable the price will be in the future.
Also, its function is in the area of supply which is used to forecast the supply of Bitcoin in the future. Also, its function is to create a line that shows the estimated price level of the numbers of available Bitcoin that are mined yearly.
Another function of the Bitcoin stick-to-flow Model is to provide a clearer framework for Investors and everyone interested in Bitcoin to understand the potential price movement in the future.
2.- What would be the advantages and disadvantages of the Stock to Flow Model?
Some of what would be the advantages and disadvantages of the stock-to-flow model are;
Advantages
Price prediction:
Stock to flow Model is a tool that helps predict how Bitcoin will increase in the future which offers more potential value to the price of Bitcoin as Investors become more confident in buying Bitcoin.
Scarcity Check:
Stock to Flow Model helps Investors to know how scarcity Bitcoin will be in the future since it compares the yearly Bitcoin that is mined or produced with the previous value of Bitcoin thereby reducing the supply of Bitcoin mined weekly, monthly or yearly so the price of Bitcoin can become more valuable.
It is a tool for long-term trend forecasting:
Stock Flow Model can be used to forecast or predict the future direction of Bitcoin and other commodities to give traders and Investors more view of the market sentiment. With this traders would be able to know if the market will be bullish or not.
Disadvantages
Limited Historical Data:
The Stock Flow Model only displays limited Historical Data which can't be used to know the current trend of the Bitcoin market. Besides predicting future prices, it can't predict current price movement accurately since limited data are displayed.
Market Change and Dynamic:
The crypto market is highly volatile and being influenced by various factors such as government rules, fundamental analysis and so on which change can happen at any moment.
Assumption can be wrong:
Since the tool mostly focuses on scarcity to determine the future price of Bitcoin, some key factors in the market are overlooked and not taken into consideration that can be of help to short-term Investors.
To this, it can't be of help to short-term Investors, but to long-term Investors.
3.- Make an analysis of the Stock to Flow graph, https://www.lookintobitcoin.com/charts/stock-to-flow-model
https://www.lookintobitcoin.com/charts/stock-to-flow-model/
Looking at the stock-to-flow graph of Bitcoin, we can see that it is a visual graph that represents the relationship between the scarcity of Bitcoin and the price of Bitcoin.
The graph is plotted from the y-axis to the x-axis which is where the Bitcoin price is showing. Now by looking at the chart below in a landscape view, longer term Investors can identify trends and patterns that can help them make sound decisions in the purchase of Bitcoin.
https://www.lookintobitcoin.com/charts/stock-to-flow-model/
By looking at the Stock to Flow Model's past prediction, you will see that the price of Bitcoin was predicted to be above $7k until next month's halving has taken place. This means after the 2024 Halving, newly minted Bitcoins will be reduced into 2, which the stock-to-flow Model has predicted Bitcoin to reach $800k by the year 2028.
https://www.lookintobitcoin.com/charts/stock-to-flow-model/
Also, based on my analysis after 2024 Halving, we may likely see Bitcoin between the price of $40k and $50k for about 2 weeks before the price or Bitcoin can move above $50k based on the 200 weekly ma indicator in the graph.
4.- Can this model be applied to STEEM? Give reasons why this Stock-to-flow graph model can or cannot be applied.
Yes, this model can be applied to STEEM because Steem is also a cryptocurrency just like Bitcoin which at the beginning of this post, I mentioned of Bitcoin other cryptocurrencies or commodities.
STEEM is also a cryptocurrency, but it is not mined like Bitcoin, but can still be predicted using this model as STEEM has its way of reducing supplies.
However, generally, the price of cryptocurrencies is not only determined by halving the supply, but by the following; market demand, adoption, market sentiment, regulatory framework, economic factors, and so on.
This model can be used to understand the potential trajectory of STEEM so Investors can assess more investment opportunities in the market. The model can also probe insight into the past price movement of STEEM.
@dave-hanny
@ruthjoe and
@vickyson am inviting you all
This unique term as made my day and given a pretty clear understanding of the concept.
. helps in identifying the availability of of commodity and knowing fully the flow by mining within a period frame of that commodity.
Looking at your advantages and disadvantages;
As entails it helps in checking scarcity, price prediction, wrong assumption and many others indeed help trader to perfect their skills st least.
This content is indeed massive, considering steem as a cryptocurrency, you said it can as well be analyze as Bitcoin is. But I think 🤔 here the format will be more intriguing, critical and otherwise.
Good luck on the contest.
TEAM 5
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Hello dear sis I really appreciate your article and I must say you have done so well to work too hard to achieve this high quality post on steemit on this short period of time and I must say I would love to see more more of your quality on this platform
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Your detailed explanation of the Stock-to-Flow Model is impressive! You've made a complex topic accessible and the practical examples really help in understanding. The breakdown of advantages and disadvantages adds depth to your insights. The analysis of the Stock to Flow graph provides a clear visual of Bitcoin's trajectory. Applying this model to STEEM is a fascinating idea considering its unique dynamics. Best of luck
Your insights into the functions of the stock-to-flow model provide a comprehensive overview of its significance in forecasting Bitcoin's future.
It's impressive how this tool aids traders and investors in predicting price movements and understanding the future supply of Bitcoin.
Thanks for shedding light to this interesting topic!
TEAM 5
Congratulations! Your comment has been upvoted through steemcurator08.Saludos cordiales hermosa amiga jasminemary, un gusto para mi saludarte y leer tu participación.
Te felicito por una buena participación, obtienes una buena calificación, sigue así amiga.
Te deseo muchos éxitos, que tengas un feliz y bbendecido día.
Thank your for your good support.
@jasminemary
You have clearly explained to us in your words that the Stock to Flow model is a method that determines the price of Bitcoin by determining its scarcity means it checks its quantity and It tells us the trend of the market, the market will go up, it will go down, we can see it from its indicators. Can't use it because this tool is only made for Bitcoin. Other than that, we can see your activities in a great way. You have proved your title and described this post to us. The post is appreciable because the world of crypto currency fluctuates and this is the rule here and your post is appreciable I wish you success in the competition.
Thank you for your time.