The co-founder of Ethereum spoke out against the Stock-to-Flow model for calculating the movement of the BTC rate, arguing that it is incorrect and only instills false hopes in people.
The Stock-to-Flow (S2F) model was developed several years ago by a popular cryptocurrency analyst known by the pseudonym PlanB. The metric is used to predict the price of BTC based on its existing reserves and the annual influx of the crypto asset into the market. The model has attracted a large number of supporters, since many predictions based on it have come true. However, PlanB previously suggested that Bitcoin would reach $100,000 by the end of 2021, and this did not happen. In November, BTC reached the current limit of $69,000.
According to the S2F model, during 2022 bitcoin should trade in a range of $50,000 to $150,000. However, during the current market downturn, bitcoin has fallen below $20,000, recording an 18-month low. Vitalik Buterin took the opportunity to speak out against the model by backing one of Ethereum’s core developers who called S2F an “epic failure.”
“Stock-to-Flow doesn’t look good right now. I know it’s impolite to gloat, but I believe that financial models with incorrect forecasts give people a false sense of confidence, making them believe in the growth of crypto assets. These models are harmful and therefore deserve all the ridicule they receive,” Buterin tweeted.
Stock-to-flow is really not looking good now.
I know it’s impolite to gloat and all that, but I think financial models that give people a false sense of certainty and predestination that number-will-go-up are harmful and deserve all the mockery they get. https://t.co/hOzHjVb1oq pic.twitter.com/glMKQDfSbU
— vitalik.eth (@VitalikButerin) June 21, 2022
In response, PlanB wrote that even industry leaders tend to blame market failures on others and play the victim instead of taking responsibility for their failed projects or poor investment decisions. The analyst added that the S2F metric performed well from March 2019 (when Bitcoin was trading around $4,000 per coin) to March 2022 (when Bitcoin hit $45,000). PlanB assessed the current situation as follows: either BTC is now extremely undervalued and will soon recover, or S2F will not be so useful in the future.
#bitcoin S2F original 2019 model (grey) and newest fit on most recent data (white dots). S2F model certainly had a good run from Mar2019 (BTC 4K) to Mar2022 (BTC 45K). For now: either BTC is extremely undervalued and will bounce back soon, or S2F will be less useful in the future pic.twitter.com/JdnLINpzTV
— PlanB (@100trillionUSD) June 20, 2022
A few years ago, the CEO of Singaporean hedge fund Three Arrows Capital, Su Zhu, also expressed doubts that S2F was suitable for predicting the price of bitcoin. In his opinion, the main reason for the growth of bitcoin is the required number of buyers of the crypto asset.
Source: Bits
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