Thriller Coin Talk - S3EP11: Bitcoin Stock t…

Listen now (31 min) | Bitcoin, Stock-to-flow Model: Stock-to-flow Ratio: Stock-to-flow Ratio for a commodity is defined as it’s years of inventory relative to annual supply. While the economic utility of a consumable good is created when it is destroyed or used up, the utility of investment assets lies in their possession and later resale. Industrial commodities therefore have low stock-to-flow ratios, this is to say, inventories usually only cover consumption demand for a few months. If there were no inventories at all, supply would have to correspond exactly to production and demand exactly to consumption. However, if there are inventories, consumption can temporarily exceed production. Since inventories of consumable commodities are as a rule very low, prices will rise quickly in anticipation of a future supply shortage and bring consumption into balance with production. As opposed to this, the price stability that comes with having a huge pile of inventory gives platinum, gold and silver a new monetary aspect. The demand driven by the store-of-value use case for gold, for instance, far outstrips that from actual industrial use cases.

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