In this model, we use a traditional supply/demand model known as the stock to flow ratio. This model assumes that the value of an asset is proportional to the scarcity of its supply.
The stock to flow ratio is a metric that is effectively the mathematical inverse of annual inflation rate e.g. an asset with an annual inflation rate of 1% has a stock to flow ratio of 100. Therefore, the lower the annual inflation rate, the higher the stock to flow, and the more scarce the asset.
We know that the maximum possible annual inflation of HEX is programmatically set to 3.69% on allocated supply (liquid + staked HEX). This leads to a minimum annualized stock to flow ratio of about ~27.
However, due to the way that the HEX staking protocol works, new coins enter circulating supply only when respective stakes mature. This leads to a mechanism where some inflation gets exported into the future and therefore leads to an effective annual inflation rate that can be much lower than 3.69%
Long term HEX investors can monitor its stock to flow ratio over time. Historically, we've seen that after HEX's inflation event on 11/19/20 (a.k.a. "Big Pay Day"), the non-annualized stock to flow ratio of HEX oscillates around the ~27 level.
This first chart above plots HEX's (unsmoothened) stock to flow ratio over time, as well as the minimum annualized stock to flow ratio. Weekly or yearly smoothened data coming soon.
This second chart plots six curves over time: eHEX circulating supply, eHEX staked supply, eHEX total supply, pHEX circulating supply, pHEX staked supply, & pHEX total supply.
