- Joined
- Aug 7, 2022
Yes. Everything else is a spook, the driving force of the price of commodities is the stock to flow ratio. Take the total current supply of a commodity and divide it by the amount of that commodity created every year, and that gets you the number of years it would take to double the current supply, known as the stock to flow ratio. The higher that number is, the more scarce the commodity is. Bitcoin's price moves in cycles every four years, with a bullrun six months before the halving and peaking eighteen months after it, followed by a correction and regression towards the mean until the next halving.
For example, according to the World Gold Council, about 209,000 tons of gold have been mined in history, and about 3,500 tons are mined every year. This gives gold a stock to flow ratio of about 60. Currently this puts gold at the highest stock to flow of any commodity, even higher than Bitcoin's average of 55. However, the halving will halve the amount of Bitcoin created every year, instantly doubling its stock to flow ratio and officially making it the scarcest commodity in history. People can claim that it's all ETF buzz, but everyone is trying to get their ETFs approved in time for the halving.
[As a side note, the stock to flow ratio is why silver's price doesn't move like gold's does. Although there are about 750,000 tons of silver in reserve (a very generous estimate, and probably far higher than reality), more than 25,000 tons of silver are produced worldwide every year, bringing its stock to flow to 30 at best (likely closer to 20).]
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