Steemit Crypto Academy Contest / S15W2 - Stock to Flow Model

Hello friends and family how are you foing, i am good. Today i am feeling immense pleasure while taking part in another contest and try to explain it upto my best knowledge the topic is Steemit Crypto Academy Contest / S15W2 - Stock to Flow Model.

1.- Explain in your own words the Stock to Flow Model, what is its function?

The most commonly used method to check the abundance of any definite resources called the stock to Flow method. It's commonly used for resources such as gold or silver and also for Bitcoin price estimation based on the methods of scarcity.

In simple words, it can be understood that if there is a higher value of stock to stock-to-flow ratio it means that particular Bitcoin has a better story., Moreover if the stock-to-flow ratio were lower it would be worse to store the value of particular assets.

Similarly, analysts used the stock-to-flow method for the calculation of Bitcoin, which enables us the compare Bitcoin with other resources such as gold or silver. If we see in 2021 about 18,700,000 BTC had mined.

[Source](coindesk. com)

It's clear to us mining will decrease the amount of Bitcoin with every 4-year cycle. From the year 2017, the Bitcoin value was 25 which would be 121 stock-to-flow ratio by the year 2024 end, which means that Bitcoin is a more scarce asset in comparison to gold.

Hence, the stock-to-flow model become popular among Bitcoiners as it is widely utilized in the prediction of Bitcoin prices from time to time.

Furthermore the investor can easily predict Bitcoin price would be higher periodically through the stock-to-flow model, it can be as seen in the chart given below.

Source

2.- What would be the advantages and disadvantages of the Stock to Flow Model?

Advantage of a stock to flow model is for the beginners investor trader who just start their business so this model is very easy for them to understand.

Shares a very easy to transfer because of transaction fees is very less and the other thing is it is in liquid so easily can be transferred.

It also protect all the investors from fraud so it is very secure.The price prediction is very easy and very accurate for the new investor and beginners because one and this model see the Bitcoin having and then give us the price prediction so it's easy for investors to invest.

And the scarcity of Bitcoin makes it more valuable and this is also place a very important role for the traders to invest.

But the disadvantage of it is that as the market keeps on changing so we can't hundred percent trust on the model and so there is a risk of loss sometime.

Transparency is not 100%

3.- Make an analysis of the Stock to Flow graph,
https://www.lookintobitcoin.com/charts/stock-to-flow-model

So this is basically representing the scarcity of Bitcoin and its price. Graph we are discussing three things the first one is Bitcoin price stock to flow model and the third dotted line is bitcoin halving.

So we are using a stock to flow model to see the Bitcoin price related to its scarcity. Like other assets like gold silver we need high scars. So this model is actually trying to give us the new supply of Bitcoin related to its already present supply and then calculate the price.

If we go in detail of stock it means the amount of Bitcoin which is present and flow means the circulating supply of the Bitcoin which is annually produced. So we can easily calculate the ratio of it by just calculating the current supply of Bitcoin and with comparison to and will annually produce Bitcoin. So this is really easy to understand whenever there is bitcoin Halving which is after every 4 years these stock to floor ratio increases substantially.

So this is very understand able from this chart that whenever does so this is very understand able from this chart that whenever the prices are beneath The stock to flow model line so for investor it is golden time to invest and whenever they see this graph the easy to understand when to do investment.

Source
And whenever we see that the prices are going up then the stock and flow model lines means that the prices are potentially touching the sky.

We can see the potential green and red area at the end of the column and where we can see that one this is green it means over extended prices. So this green area is basically time to accumulate.

So when we see the line just above the stock and flow line so this is the great time for the investors to so this is the great time for the investors to invest.

So if I sum up my discussion the stock to flow model actually treats the Bitcoin same as like gold platinum or silver and we called and this store of value where it is same as same like gold and silver but to increase their supply this is a very difficult thing because we need huge resources to mind gold and then find the resources and to save them for longer time so this need a lot of money and time.

Same like a gold and platinum it is very difficult to increase the supply of Bitcoin it is always in limited supply thats the reason that its price going up and up and the Bitcoin require a lot of electricity and a lot of mind to increase the coin price in millions so that's the reason of its limited supply.

But this indicator we used is to see the price of Bitcoin is very good and we can predicat the price of the Bitcoin because Bitcoin Halving and by comparing the events which occur before and after. We can assume when to invest and when we are at loss

4.- Can this model be applied to STEEM? Give reasons why this Stock to Flow graph model can or cannot be applied.

So can we apply the stock to flow model on the steem I think that's not possible because there are a lot of unique features which other cryptocurrencies have but the steem don't have

If we talk about the scarcity of Bitcoin which is a really unique feature unique characteristics of the Bitcoin but steem don't .

Another important thing is bitcoin having which is occur after every four years and this is also another uniqueness of Bitcoin and that's the reason we are applying this model to see the price of Bitcoin just because of its scarcity so steem also doesn't have.

And if we talk about both of these coins similarities yes both are cryptocurrency but if we see their rate of production it's entirely different although both have limited supply but steem is very less as compared to Bitcoin.

And the ecosystem of steem is also entirely different and a lot of factors which affecting the steem so I don't think so that we can apply this model to on the steem.

Its all about my today's post.

I would like to invite my friends @jannat12, @maryamnadeem and @iqrarana786 to participate in the contest.