Stock to Flow Ratio

Quantitative measure of the relationship between all currently available units of a resource or asset and its production rate. For example, in commodities, it’s determined by years of commodity inventory relative to annual supply. If economic utility of a consumable good (commodity) is created when it is used or destroyed, the utility of investment assets (Bitcoin) rests in its possession and subsequent resale. Industrial commodities have low stock-to-flow ratios because inventories usually suffice consumption demand for a few months and even a period of higher demand relative to production. However, assets like gold and Bitcoin have higher stock to flow ratios because of lower issuance relative to current supply. In fact, Bitcoin’s stock to flow ratio should theoretically only increase over time as its issuance programmatically halves every 210,000 blocks created, or roughly every four years.