Bitcoin S2F model predicts a surge to $222,000 in 2026! Bitwise: Institutional demand has rendered the model ineffective.

The Stock-to-Flow (S2F) model predicts that Bitcoin (BTC) will reach $222,000 by 2026, but Bitwise's chief researcher André Dragosch warns that the increasingly mature market for Bitcoin may have already surpassed the predictive framework of the S2F model. He points out that S2F has statistical flaws and excludes demand-side drivers, especially after the ETF listing in January 2024, where institutional demand has had more than 7 times the impact on BTC prices than the supply effects brought about by the Halving. Analysts compared other predictive models such as BAERM (which predicts $173,000 by the end of 2025) and a more conservative power law model, emphasizing that fundamental changes in market structure are challenging classical valuation theories.

S2F Model Faces Challenges: Has Bitcoin Really “Grown Up”?

The Stock-to-Flow (S2F) model of Bitcoin was once regarded as the cornerstone of long-term valuation, predicting prices by measuring scarcity. The model compares the existing supply (Stock) to the annual new supply (Flow); the higher the ratio, the greater the scarcity and the higher the value.

Optimistic Predictions and Intrinsic Flaws of S2F

• The S2F model created by PlanB in 2019 links the price increase of Bitcoin to the Halving events that occur every four years. The model predicts that Bitcoin will reach $222,000 in 2026 and looks forward to an astonishing $10.9 million over the next decade, with a compound annual growth rate (CAGR) of about 58.3%.
• Bitwise's warning: André Dragosch, the head of research at Bitwise Europe, advises investors to use the S2F model with caution. He believes that the statistical issues of S2F and the exclusion of demand-side drivers limit its reliability.

Dragosch cited economist Kripfganz's criticism in 2020, stating that the S2F model has “incorrect specifications” because it treats Halving (which doubles the S2F ratio) as a key variable, rather than a random variable. More critically, the price of Bitcoin has consistently remained below the price implied by the S2F model.

Institutional Demand: Overwhelming Force Reshapes Valuation

Dragosch emphasized that the macro environment for Bitcoin has changed dramatically since PlanB's early analysis.

Demand far exceeds supply: “Today, institutional demand (through Bitcoin ETPs and Treasury holdings) has exceeded the annual supply reduction brought about by the most recent Halving by more than 7 times.” This observation directly challenges the core assumption of “scarcity” in the S2F model. In the face of institutional capital, the impact of supply Halving is no longer the dominant force driving prices.

Beyond Scarcity: A Comparison and Examination of Other Valuation Models

In addition to S2F, Dragosch also compared two other widely cited Bitcoin valuation models that provide a more cautious but still bullish projection trajectory.

BAERM Model: Adjusting the Impact of Halving Shock

The Halving Supply Shock Model (BAERM), also known as the “Bitcoin Autocorrelation Rate Model,” uses historical price data to measure the impact of each Halving on the price, taking into account the diminishing effects of supply shocks.

• Estimated Value: BAERM currently estimates the “fair value” of Bitcoin at $159,000, predicting it will reach $173,000 by the end of 2025, and $7.59 million within ten years. The model has had a historical fit of about 88% since the second Halving, showing strong performance.
• Model Limitations: Dragosch believes that BAERM may be “a bit outdated” as it fails to adequately consider the impact of institutional buying or the changing trends in adoption.

Power Law Model: Conservative Long-term Forecast and S Curve Challenge

The Power Law Model connects the price of Bitcoin with a time-based formula. Although it has an astonishing 99% fit in log-log regression, its predictions are unusually conservative.

• Ten-Year Forecast: Its ten-year Bitcoin price prediction is only $2.03 million, far lower than the S2F and BAERM predictions, based on the assumption that returns will continue to decline as Bitcoin matures.
• S Curve Challenge: Dragosch emphasizes that “the technology adoption curve tends to follow an S curve pattern,” meaning that demand accelerates again as it transitions from 'early adopters' to 'early majority'. This poses a serious challenge to the diminishing returns assumption of the power law model.
• Market structure changes: Since the rise of ETFs and institutional buyers in January 2024, the market structure has undergone fundamental changes, and the past performance patterns after Halving may no longer apply.

Conclusion

Although the Stock-to-Flow model attracts attention with its extremely optimistic prediction of $222,000, Bitwise's analysis reminds us that the Bitcoin market has entered a new era driven by institutional demand. The inflow of ETF funds has become a more powerful force than the supply Halving. When making long-term plans, investors should comprehensively examine various valuation models, including BAERM and power laws, and recognize that changes in market structure may require us to rethink Bitcoin's value anchoring.

Disclaimer: This article is for informational purposes only and does not constitute any investment advice. The cryptocurrency market is highly volatile, and investors should make cautious decisions.