Bitcoin S2F Validation — The S2FGM2 Model
Quantifying Bitcoin’s Liquidity Premium & Validating S2F as Fundamental Value
---
TL;DR
Bitcoin is prestine collateral that absorbs global fiat liquidity.
The S2F model explains Bitcoin’s long-term value, but short-term market noise often buries its signal. By introducing a liquidity premium using smoothed, lagged global M2 delta (GM2), we clean up that noise and reveal the truth:
> Stock-to-Flow is the fundamental driver of Bitcoin’s valuation.
With this model, we can project BTC’s price across time with statistical confidence (R² ≈ 0.965). The risk/reward becomes violently asymmetrical:
→ Massive upside
→ Near-zero long-term downside
There is simply no better place to allocate your time, energy, or capital than into the Bitcoin ecosystem.
-------‐-----------------------------------------------------------------------------------------------
1. Introduction: The Broken Compass
The Stock-to-Flow model introduced by PlanB in 2019 changed how the world saw Bitcoin. It made one thing clear: scarcity drives value. But like all simple truths, the signal got lost in the volatility of liquidity cycles, macro shocks, and human panic.
Critics said S2F failed.
They were wrong.
It wasn’t wrong — it was incomplete.
S2F gives you the shape of Bitcoin’s valuation curve. But price moves along that curve based on the available liquidity in the system. Without accounting for this, S2F’s predictive power breaks down during expansion and contraction phases.
Enter: Global M2 Delta — the missing variable.
---
2. Methodology: Smoothing Out the Noise
To construct a predictive model, we merged S2F with global M2 liquidity trends. Here's how:
a. S2F Input
Stock: Total BTC supply over time
Flow: 52-week rolling average of newly mined BTC
S2F Ratio: Smoothed for realism by using this style for flow, then lagged 13 weeks (markets digest scarcity slowly)
b. Liquidity Premium (GM2)
We calculate the weekly change in global M2
Apply logarithmic weighting to normalize the impact of extreme events
Smooth with a 26-week rolling average
Lag 13 weeks to reflect transmission delay between liquidity and asset valuation
c. Price Input
Weekly HLOC average (high, low, open, close) used for modeling correlation to S2F + GM2 conditions
Final output is implied market cap, which we divide by BTC supply to project price
---
3. The Equation
Final model structure:
BTC_Price = 10 ^ ( 7.11513 + 2.72284 * LOG10(S2F rolling 52 week) + 0.03603 * Smoothed_Lagged_GM2) / Stock
Translated:
S2F defines the price gravity.
GM2 adds or subtracts energy (liquidity premium).
Price drifts around the gravity curve, but the model shows exactly where it should be.
---
4. Model Results
R² ≈ 0.965
Works across all Bitcoin cycles. When delta off of predicted price is charted the real dollars off of predicted has stayed fairly stable at extremes. As BTC's value has risen the % the real price deviates from predicted has shrunk dramatically. This shows that the market are maturing and the model is becoming more accurate with time.
The modle captures both the exponential long-term growth and the chaotic interhalvening price runs.
Behavior at +2SD are due to massive surges in s2f coupled with GM2 liquidity. (think Q4 2017, Q4 2020)
Behavior at -2SD is rare and violently reverts upward (like a beach ball being released underwater)
---
5. Fibonacci Lags & Market Psychology
The weirdest thing? The model optimizes at Fibonacci-style lags and smoothing windows:
8, 13, 26, 52 weeks
Multiples of 13 (the trader’s Fibonacci)
These lags give the highest R². They were not picked at random or on a hunch.
We believe this may reflect:
-Investor psychology cycles
-Miner selling rhythms
-Liquidity digestion times baked into market behavior
-Natural financial oscillations that humans unconsciously follow? To me it does not fell random.
---
6. Conclusion
Bitcoin is a pristine collateral that absorbs FIAT liquidity. This model — the S2FGM2 Equation — validates Stock-to-Flow as the primary fundamental force behind BTC’s valuation, and introduces the GM2 liquidity premium as a way to make sense of market noise.
What remains is clarity.
With this tool, we can now project Bitcoin’s price with confidence, cycle over cycle. The risk/reward profile is unmatched. Your long-term downside? Practically zero. Your upside? Infinite (as S2F approaces infinity) and asymmetric.
***There is no better place to invest your time, capital, or attention than in the Bitcoin ecosystem.***
---
"Markets are messy. Bitcoin isn't. Liquidity comes and goes. Scarcity stays."
~jason the original & Gabbie, 2025