The Stock-To-Flow Modeling Does Not Apply To Bitcoin

There are differences between The Bitcoin Standard andThe Gold Standard. They are both dynamic but in different ways. They are both sound money serving different functions and they should both be embraced for their respective use cases to further competition in currencies. It is a mistake to dismiss either or put them in the same box.

More than once I have been asked to distinguish Bitcoin from the Bitcoin Standard.

The distinction is simple. Bitcoin is static.

It is secured by the longest chain with proof of work and has a fixed supply.

This is the innovation of Bitcoin. This is why Bitcoin and Bitcoin alone is a candidate for The Standard in the digital universe. This is the feature, uniqueness, and strength of Bitcoin, not a shortcoming or bug.

And it is for this reason The Bitcoin Standard is dynamic.

This parallels the emergence of the gold standard. Gold as a commodity is static. It is secured by its scarcity, mining difficulty, and relatively fixed supply. Gold has the highest stock-to-flow ratio of all commodities. Most of the gold mined over the past 6,000 years remains in existence. And new gold coming from production (the flow) is small in comparison to the total gold stock.

This means there is never a shortage of gold. And it means gold futures never goes into backwardation except for short periods of time in isolated locations.