What Bitcoin, Gold, and Real Estate Have in Common

A new framework for measuring true scarcity

What if I told you that Portland real estate is scarcer than gold?

Or that Manhattan & Chicago have a much stronger scarcity profile than Bitcoin?

There’s a little-known framework, popular in crypto circles, that might be the most underrated way to evaluate an asset’s durability: the Stock-to-Flow Ratio. Originally developed to explain Bitcoin’s value proposition, it measures how hard it is to inflate the supply of something — and, therefore, how well it preserves value over time.

🧭 This article continues the theme we explored last week in The Iron Law of Supply - why constrained assets outperform over time.

When I applied this analysis to housing markets across the U.S., the results shocked me.

Some cities aren’t just expensive - they’re structurally irreplaceable.

In my recent reading of The Bitcoin Standard, I came across this metric and found it to be an incredible framework for viewing investing, scarcity, and durability of value preservation.

For the uninitiated, the basic premise is this. You have the “stock” of something. Let’s use gold as an example - there is a worldwide hoard of gold (all the gold ever mined in human existence, and still in human hands - i.e., not in a sunken Spanish galleon). And then you have the flow - how much is added to the supply each year through mining activity. All else being equal, a HIGHER stock-to-flow ratio implies greater durability of the asset’s ability to hold value.

The higher the flow of new supply, the tougher it is to view the asset as a store of value. Which inevitably leads to the analysis of fiat currency. So Fiat has an existing supply of money (M2), and then the Central Banks are constantly printing more money, which would imply a very LOW stock-to-flow ratio. And we already know that the USD is a poor store of value. It gets deflated away every single year by institutionalized programs.

To illustrate this point - since 1971 (the end of the gold standard), the U.S. dollar has lost ~87% of its purchasing power. What you could buy for $1 in 1971 now costs over $8.10. Said differently - that’s a 13x erosion in value. Not a store of value.

So, of the assets we typically look at to determine the stock-to-flow ratio - here’s a quick table to give you a sense. By the way - these were determined using the 10-year lookback (for Fiat), and BTC has a more programmatic approach so we used the post-halving figure instead.

And as we know - BTC is the “hardest” currency available, and it shows in its stock-to-flow ratio. It’s a core rationale for why BTC is a valuable store of value - at least until something happens to the underlying algorithm.

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Utilizing this Lens with Real Estate

The core idea is simple:

If you can’t rapidly increase the quantity of something, it becomes more resistant to inflation — and therefore a better store of value. This got me thinking about how it could apply to the housing market.

Because here’s the thing - housing is a scarce asset. Historically, real estate has been regarded as a reliable hedge against inflation. So - in theory - it should exhibit a really robust stock-to-flow ratio.

And the data does support that.

Here’s the analysis we conducted. We took the average housing stock across the US (multifamily + single family) and divided it by the average of new unit production over the last 10 years. The result?

👉 The US Housing Market’s average STF Ratio for the last decade is 120.

Consider, then, that this is effectively saying that housing is a better store of value than gold, BTC, and of course fiat currencies. I’ll caveat this with - it’s also dependent on current values. Obviously if you are wildly overpaying or overleveraging a property it may actually NOT be a good store of value. But from a fundamental framework - housing is more scarce and harder to deflate through overproduction than basically all other options.

This data has born out - housing has kept pace with inflation, and proven to be a solid store of value.

Then we went a step deeper:

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So, how do individual cities shake out?

Here’s where things get fun. Any long-term reader of the Timeless Investor knows that we have favored - in our investing strategy - structurally supply-constrained markets. That generally lends itself to blue-state urban core locations. Think → San Francisco, Seattle, Manhattan, Portland. I compare and contrast that with the typical “red-state” cities - Austin, Kansas City, Ft. Lauderdale, Miami (which is a unique beast).

The analysis includes the 10-year average supply addition, as well as the average supply over that period.

To be helpful, I have color-coded everything. Red states get a red bar. Blue states a blue bar. We also added BTC, fiat, and gold for comparison.

The data is relatively demonstrative. Deep blue state locations, such as Chicago, Manhattan, San Francisco, and Portland, all exhibit BTC-level or better stock-to-flow ratios, implying that they should prove to be more durable stores of value over time.

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How about the US Stock Market?

Alright - let’s delve into a fascinating detour here. I run a real estate firm, so it's understandable that my focus in life is on real estate investments. However, I also spent a lot of time as a stock market investor.

So the question now is - what is the stock-to-flow ratio for the S&P 500?

This is an incredible tangent because the US Stock Market has the highest STF Ratio of any of the comparable sets out here. And the reason why is incredibly illustrative.

The US Stock Market actually has an incredible zero or negative flow in most years. Even in some rare years with net positive growth, it’s still over 200.

Why?

The Stock Market has this incredible function called buybacks. It’s a mechanism that doesn’t exist in other markets. In essence, the US Stock Market is eating its own stock of stock. Every single year.

In other words - it’s a structurally deflationary market because equity supply is being reduced in most years.

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Final Takeaway

Scarcity isn’t just about gold or Bitcoin anymore.

When measured through the lens of stock-to-flow, both housing and U.S. equities emerge as elite stores of value - far superior to fiat currencies and, in many cases, on par with the hardest assets on earth.

Every investor should have exposure to both.

Because in an era of endless printing and rising asset inflation, what you can’t make more of is what matters most.

That’s why at Lombard Equities, we focus on acquiring high-quality housing assets in structurally supply-constrained markets — places where production can’t ramp up and value compounds quietly over time.

🧠 If this framework resonates with how you think about capital preservation, let’s connect here to discuss upcoming opportunities (for accredited investors only).