A Future Supply Model for Bitcoin’s Market Cap

A Non-Divergent, Long-term, Residual Supply-driven Bitcoin Forecast

Abstract

I introduce a two-parameter, convergent, residual supply-driven Bitcoin long-term forecasting model that is an alternative to PlanB’s popular but mathematically divergent two-parameter scarcity-driven Stock-to-Flow model. Over a 50-year time span, the models differ by 12 orders of magnitude in their Bitcoin price forecast. The Future Supply model is a linear correlation of the log of market capitalization with the remaining Bitcoin supply yet to be produced (future supply) at any epoch.

The mathematical form of the model is inherently convergent, whereas the Stock-to-Flow model is a power law of an exponential (since stock-to-flow is exponential in block height), and thus is inherently divergent.

The Future Supply model exhibits R² = 0.92 with historical data on quarterly intervals of 13,125 blocks (1/4 of a Block Year). The residuals are well-behaved but skewed positively. The standard deviation of the residuals is 0.374 in base 10 logarithm terms, reflecting Bitcoin’s high volatility.

Using the best fit parameters, the model converges toward an asymptotic value for market cap of $1.63 trillion (in 2020 dollars) and an asymptotic price…