Bitcoin's Undervaluation and Recovery Path Amid Extended Bull Cycle: Strategic Insights from PlanB's S2F Model and On-Chain Metrics

Bitcoin's 2025 bull cycle has entered a critical phase, with institutional investors increasingly leveraging PlanB's Stock-to-Flow (S2F) model and on-chain metrics to navigate entry points and assess undervaluation. As the asset's scarcity-driven narrative converges with macroeconomic tailwinds and regulatory clarity, the interplay between these tools offers a compelling framework for understanding Bitcoin's trajectory.

PlanB's S2F Model: Scarcity as a Foundational Narrative

PlanB's S2F model, which evaluates Bitcoin's value through its programmed scarcity, remains a cornerstone for long-term investors. The model calculates the ratio of Bitcoin's total supply (stock) to its annual production (flow), with higher ratios indicating greater scarcity. As of 2025, Bitcoin's S2F ratio stands at 56–58, surpassing gold's 62-year production timeline and reinforcing its narrative as a superior store of value. Post-2024 halving, Bitcoin's annual inflation rate has dropped to 0.83%, below gold's 2.3%, further tightening its supply dynamics.

PlanB's central projection for 2025–2026 is a price of $500,000, with a potential range extending to $1 million. This forecast is underpinned by historical patterns observed in previous halving cycles (2012, 2016, 2020) and the asset's diminishing supply. However, the model has faced criticism for oversimplifying demand-side factors and failing to account for macroeconomic shifts or investor sentiment, as seen in its 2021 overestimation. Critics like Ethereum co-founder Vitalik Buterin have labeled the model "harmful" due to its overfitting of historical data according to analysis. Despite these critiques, the S2F model's emphasis on scarcity remains a critical lens for institutional investors, particularly in a post-halving environment.

On-Chain Metrics: Complementary Tools for Institutional Entry

Institutional adoption in 2025 has been marked by a sophisticated integration of on-chain metrics to refine entry strategies. Key indicators such as the Network Value to Transactions (NVT) ratio, realized price, and holder behavior provide real-time insights into Bitcoin's valuation and market dynamics.

1. NVT Golden-Cross and Realized Price: The NVT ratio, which compares Bitcoin's market capitalization to its on-chain transaction volume, reached a golden-cross at 1.51 in 2025, signaling a valuation supported by real usage rather than speculative mania. Additionally, Bitcoin's realized price-a metric representing the average cost basis of all holders-has crossed above the 200-week moving average, historically preceding major bull runs. These signals suggest that Bitcoin's price is anchored to fundamental activity rather than short-term volatility.

2. Holder Conviction and Supply Constraints: Metrics like the Spent Output Profit Ratio (SOPR) and Market Value to Realized Value (MVRV) highlight strong conviction among long-term holders. With 74% of Bitcoin's supply illiquid and 75% dormant for over six months, the tightening float creates upward pressure on price. The SOPR of ~1.03 indicates modest profit-taking, while the MVRV ratio of 2.15 reflects substantial unrealized gains, reducing immediate sell-side pressure according to on-chain analysis.

3. Institutional Activity and ETF Flows: The approval of U.S. spot Bitcoin ETFs, such as BlackRock's iShares Bitcoin Trust (IBIT), has redirected institutional flows toward regulated venues. By Q1 2025, IBIT had amassed $18 billion in assets under management (AUM), with 40–50% of total crypto trading volume attributed to institutional participants. These developments have not only stabilized Bitcoin's volatility but also deepened its integration into mainstream financial infrastructure.

Strategic Synergy: S2F and On-Chain Metrics in Institutional Portfolios

Institutions are increasingly combining the S2F model with on-chain analytics to form a holistic view of Bitcoin's value proposition. For example, the S2F model's focus on scarcity aligns with on-chain metrics that quantify supply-side constraints, such as the 74% illiquid supply. Meanwhile, NVT and realized price offer insights into demand-side dynamics, including institutional buying through ETFs.

A notable case study is MicroStrategy's 2024 acquisition of 257,000 BTC, which was informed by both the S2F model's long-term scarcity narrative and on-chain signals of tightening supply according to market analysis. Similarly, BlackRock's ETF strategy leverages NVT and SOPR to time market entries, capitalizing on Bitcoin's transition from speculative asset to strategic reserve. These strategies reflect a broader shift toward treating Bitcoin as a legitimate hedge against inflation and geopolitical risks, particularly as its volatility has halved to 43% compared to 84% in previous cycles according to Q4 2025 analysis.

The Road Ahead: Undervaluation and Recovery Path

Despite bullish fundamentals, Bitcoin's price in Q4 2025 remains below PlanB's S2F projections, suggesting undervaluation relative to its scarcity-driven potential. According to institutional surveys, 86% of institutional investors planning to allocate to Bitcoin in 2025. The convergence of macroeconomic factors-including the post-halving supply shock, regulatory clarity, and global liquidity expansion-positions Bitcoin for a recovery phase, with analysts projecting a price range of $200,000–$210,000 within 12–18 months.

However, risks persist. The NVT ratio's overvaluation relative to transaction volume and the potential for macroeconomic headwinds (e.g., interest rate hikes, geopolitical tensions) necessitate a multi-model approach. Institutions are advised to use the S2F model in conjunction with on-chain metrics like MVRV Z-Score and SOPR to identify turning points and mitigate downside risks according to market research.

Conclusion

Bitcoin's 2025 bull cycle is being shaped by a strategic alignment of PlanB's S2F model and on-chain metrics, which together provide a robust framework for institutional entry. While the S2F model's focus on scarcity remains foundational, its integration with real-time on-chain data-such as NVT, realized price, and holder behavior-enables a more nuanced understanding of Bitcoin's valuation. As institutional adoption accelerates and supply constraints tighten, the asset's undervaluation presents a compelling opportunity for long-term investors, provided they remain cognizant of evolving macroeconomic and regulatory dynamics.