Steemit Crypto Academy Contest || S15w2-Stock to flow Model

• Hello my gorgeous 😍😍 ladies and gentlemen

• Hope your doing good and today I come up again with another challenging contest organise by @steemitcryptoacademy and this community is always going to play special role by educating us by giving us informative topics to learn.

• So let's start about today's discussion

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

• I would like to describe the what is stock to flow so this is basically this is comparing the relationship between Bitcoin and the Bitcoin which already existed its supply and every year the Bitcoin which is created so in simple word that comparison between existed and new created Bitcoin every year.

• And the stock to flow model is actually this is a method I will elaborate it.

• Functions

• The stock to flow model is basically used to quantify the scarcity for the assessment of metals for example gold or silver and now been its able to applied to Bitcoin so basically this model has two categories

• STOCK so from its name its clear that this is actually we are talking about that total amount of the thing available or the supply that has been already minedup and which is present in circulation.

• And the flow is basically the rate at which we are getting new supply for the production of new things.

• And then we calculate the stock to flow ratio and this is simply calculating by stock which means supply and flow means yearly production rate.

• The more ratio means more scarcity and it has high value for example if I have a high amount of gold so the high stock to Flow ratio so it's scarcity and value increased.

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

• Advantages

• There are a lot of benefits if we talk about the first benefit which I want to tell is

• This actually give us new ideas to start business.

• It makes the business so simple and also helps the investors to New capital and also give them opportunity regarding their investment.

• This makes your employee permanent and enable them and give them this courage that they can stay longer with you for work because it gives extra incentives to the employee and this is done by share options so this is a very good initiative that the employees can work in long term.

• And your public profile is so good that it enables you to reassure your investors and your suppliers.

• It also gives opportunity for you to do business and then by using different quoted share.

• It also has the market to develop the company share.

• The model is simplest to use everyone is simple to handle and can use it.

• The most important thing is it helps you to tell when your investment is at risk and it also helps you tell you when to invest.

• And this actually give us simplest method to measure the scarcity of investment.

• Disadvantages

• There are a lot of disadvantages but the most important one is accuracy on stock and flow for investment is not guaranteed and it is not 100% accurate

• As I always being talk about that nothing is permanent or we can stay and say that the things which stay always so yes there are always fluctuations going on so when there is market fluctuation which exceeds a certain level means out of your control in certain aspect like economic laws occur in your investment so then there is loss.

• The most important thing is shareholder interest so when you are the owner of a company and you have to see the shareholder interest which sometime may be different from your so you need to consider the responsibilities to shareholder.

• Transparency in any business is really important so the companies which need some rules and regulations and first of all they must complete the rules and regulation secondly they must coordinate with the standard of the governers

• So any investor you are being with you must share each and everything with your investors if you want to get the maximum benefit of being honour of the company so you must attract the other investors.Thats bad you need to share each and every secret.

3.Make an analysis of the Stock to Flow graph

https://www.lookintobitcoin.com/charts/stock-to-flow-model.

[Screenshot from](contest posthttps://www.lookintobitcoin.com/charts/stock-to-flow-model)

This picture I have took screen short from contest post

• This graph is telling us about relationship between the Bitcoin price and the scarcity of Bitcoin the people who are very much experienced and they can easily see the patterns to purchase the Bitcoin in this graph.

• So in this graph we can see that if I give you example so before Halving we can see the Bitcoin price is predicted around 10k and after 2024 when the Bitcoin Halving will occur the price will reach to $100K.

• So if we see the relationship between Bitcoin and stock to flow we can see that fast few years the price of Bitcoin and stock to flow model predictions we can read it that the predicted price was actually much raised but in reality the price is very low.

• So let's talk about in details and firstly I want to elaborate the basic of it how to understand it first then understanding of numerical value is important than only we can understand so there are a lot of lines in this graph and I will explain it one by one.

• So there is dark yellow or zinc colour LINE which represents the ratio of stock to flow.

• Then we can see another labelling which is Bitcoin price and which is represented in the dotted line.

• So the line which is presenting the Bitcoin price is showing us that most probably we will touch the $100K after Bitcoin Halving and we can see in the graph as well clearly.

• There is another vertical line which is in multi colour and this is representing before the Bitcoin Halving.

• So what we have seen in this graph that the main two colours I am describing one is green and other one is red whenever the price will raised more than stock to flow ratio so lines which I already mentioned will be red and otherwise it will be vise versa green.

• I have analysed most of the chart and I have seen stock to flow it is represented always high like a sky and its actually always keep on going up and never come back so why is this is just because the nature of Bitcoin which is called the scarcity and which is just constant maintaining because of the Bitcoin Halving.

• But we can say this will rise after the Bitcoin Halving when they are will be increase demand and over all the supply is going to decrease so then definitely the price is increasing and according to this graph we can see that and the price is going to reach up $800k by the end of 2028.

• We can't 100% rely on this model because there are always fluctuations going on and the main disadvantages I already mentioned is that it can't give you 100% accuracy and transparency.

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

• If we say like Bitcoin the steem is also cryptocurrency.We can implement but practical it seems difficult to do.

• Yes this model is not applicable to steem because because the production of the steem is very limited only we can get as a reward when we do hard work the content and so sometime we are not very active or we are not doing engagement actively so we are not getting steem in big amount so this is just the hard work of the person so we can get the steem where as the Bitcoin is not the same.

• And there is bitcoin Halving going on and its supplied decrease they are is chance of other alternative coins supply increase but in that case this is not the investor who look around the steem only so we can say due to its ecosystem and due to other factors and this is not applicable to this.

• According to my knowledge and analysis I think this model cannot be applied for steem.The production rate is entirely different between two coins.

• Bitcoin is actually like a moon and a lot of investors have actually a firm believe and a sense of security for Bitcoin rather than steem.

• The most important thing is bitcoin Halving and I think that's the beauty of it and there is always specific scarcity going on but with steem this is not possible.

Conclusion

• I have explained in my words the S2F model and how does it work and then I have talked about its advantages and disadvantages and I have mentioned its transparency and accuracy is not 100% so this is not a very good actually model to use everywhere and then its amplification for steem I think that's not possible so that's how I have summarized the topic.

I would like to invite my friends to take part in this contest

@suboohi
@uzma4882
@ashkhan