As part of Jackson’s sleep routine, Tiffany and I sing “Twinkle Twinkle Little Star” right before he goes to bed each night.
Consistently, night after night, when we start, he joins in.
On good nights, if we’ve timed it right, he’ll happily sing along, coo’ing and caw’ing with us, and then fall asleep shortly after. Other nights, when he is either over-tired or isn’t ready for bed yet, he’ll make a series of sad faces once we start. And inevitably, when the sad face comes out, he’ll wail and scream as we sing.
But the thing is, he always has a reaction (unlike with other songs that we sing to him throughout the day).
This is fascinating.
I believe he is connecting the dots that “Twinkle Twinkle Little Star” means bed time is coming up next. Put another way, he is picking up on a pattern.
I’m surprised that at only 4 months old, he is able to recognize this pattern and predict what is coming next. But since he can, we make sure to stick with it every night.
I’ll be honest. When Tiffany first proposed we create a bedtime routine for Jackson, I was skeptical. I thought that he wouldn’t / couldn’t care less.
But, now having done the same routine night after night for a month, I’ll admit that I was wrong.
As a new dad, I now understand that babies crave proutines. That’s because routines creates predictability. And in a chaotic world with so much newness, a sense of predictability allows a baby to look ahead and know what is coming next.
Realizing this, it has become easy to see many other routines that Jackson also recognizes…like when he is going to be fed, when it is play time, and of course, when it’s time for bed.
The more I’ve seen these patterns throughout his day, the more I started thinking about the power of patterns and predictability in my own life. And of course, that led me back to bitcoin and towards a better understanding where the price is and where it is potentially headed next.
Predicting the price of bitcoin
Rewinding the clock, in the fall of 2019 while on my honeymoon (when bitcoin was <$10k), I first heard about the Stock-to-Flow (S2F) model (link). It predicted that the price of bitcoin would be $100k in 2021, $1M in 2025, and a whopping $10M in 2029.
At first, I found it amusing but immediately dismissed it because it seemed so outrageous. But yet, here we are, roughly halfway through 2021, and the price of bitcoin is ~$58k.
Right on schedule.
How is it possible?
First, you have to understand a few predictable qualities about bitcoin.
Without any doubt, it can easily be verified:
- how much bitcoin is in circulation (~18.9 million out of a possible 21 million)
- much new bitcoin is “mined” right now (900 bitcoin / day until 2024)
- how much new bitcoin will be mined in the future (450 per day from 2024 to 2028, and then 225 per day from 2028 to 2032, etc due to the halving event every 4 years…which as you can guess, cuts the amount of new bitcoin that enters circulation by half)
The beauty is that these amounts are algorithmic and cannot be changed. Put another way, it is 100% predictable.
Why does this matter?
When the current supply is known, and you can predict what new supply will be, you can model out what the price could / should be in the future.
And that’s where S2F comes in.
At a very high level, the S2F model compares the “stock” (ie. the current circulating supply of ~18.9 million bitcoin) vs. the “flow” (ie. the rate of new bitcoins that enter circulation). Using this ratio, it has accurately predicted when bitcoin would reach prior milestones of $1k and $10k. And so far, it is right on schedule for the next milestone of when bitcoin should hit $100k.
In general, a higher S2F ratio means a higher price. So with each upcoming halving event (every 4 years), the S2F ratio for bitcoin goes higher. And with it, the price should move up too.
Beyond bitcoin, the S2F model also works to determine the price of gold, silver, and other precious metals. That’s what makes it really interesting to consider when thinking ahead to the $100k, $1M, and $10M price predictions for bitcoin.
Why this matters
As a new dad, I know there are lots of big expenses in the future. My goal is to ensure that my family is financially prepared so that we can live the lifestyle we want. S2F helps me “see ahead” to what the price of bitcoin could be, which then takes away much of the risk to HODL.
It also removes the temptation of selling for small gains today, knowing there are bigger gains to be had in the future.
If bitcoin really does follow the S2F model and hits $100k in 2021, and then $1M in 2025, and $10M in 2029, it’ll not only set us up financially, but it will actually create generational wealth.
It goes without saying that I also understand that this is just one model about the price of bitcoin. And with all predictions, it can fall flat on its face. But since it has been right on schedule with predicting prior milestones, I’ll keep leaning on it personally.
And while we’re moving towards $100k, I’ll be continuing to sing “Twinkle Twinkle Little Star” each night while following along with the upwards price movements.