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Vitalik Buterin believes Bitcoin Stock-to-Flow model is false for this reason


www.fxstreet.com 21 June 2022 08:46, UTC
Reading time: ~3 m

  • Ethereum co-founder Vitalik Buterin criticized Plan B's Stock-to-Flow model, arguing it gives investors a false sense of certainty. 
  • On June 18, the Bitcoin price dropped below the lower bound limit of the model for the first time, calling its validity into question. 
  • As Bitcoin price plummets, Plan B argues either BTC is extremely undervalued and will bounce back, or the model’s less useful. 

Buterin believes the Bitcoin Stock-to-Flow model proposed by Plan B is unreliable. On June 18, the Bitcoin price invalidated the model for the first time, dropping below the lower bound and raising questions about its validity. 

Plan B's model for Bitcoin price prediction invalidated

On June 18, 2022, Bitcoin price plummeted to a low of $17,600 and breached the lower bound of the Stock-to-Flow model for the first time. This has called the mathematical model's validity in question. 

The Stock-to-Flow (S2F) model proposed by Plan B suggests that Bitcoin's price can be forecast roughly and will continue on a steady path upwards, with nearly tenfold returns every four years. The mathematical model compares the existing Bitcoin supply (the total amount available) to the new production flow (the amount mined during a specific year).

Rob Wolfram, a Bitcoin maximalist, consistently charts Bitcoin prices against Plan B's Stock-to-Flow model. The dark blue area represents one standard error from the predicted price, and the light blue area represents two standard errors. In the following chart, the predicted price is extended into the future until Jan 1, 2027. 

Rob Wolfram charts BTC price against S2F model

Rob Wolfram charts BTC price against S2F model

Buterin slams Plan B's S2F model says it deserves mockery

Vitalik Buterin, the co-founder of Ethereum, recently slammed Plan B's Stock-to-Flow model. Buterin argued that financial models that give people a false sense of certainty and project a number or predestination for an asset's price are harmful. The Ethereum co-founder believes such models deserve all the mockery they get. 

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

Plan B's model was considered invalidated when Bitcoin price failed to hit $100,000, Wolfram’s projection, by the end of 2021. However, the analyst has persisted in believing in the model, arguing either Bitcoin is extremely undervalued and will bounce back soon or the Stock-to-Flow model will be "less useful" in the future.

Plan B responded to criticism for S2F on Twitter and said that the original model and the newest fit had a good run from March 2019 to March 2022. 

#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

Analysts believe Bitcoin price is close to a bottom

Analysts at FXStreet have evaluated the Bitcoin price chart and noted that the 200-week moving average is an important metric for the asset. They note that Bitcoin bottoms typically occur close to the 200-week moving average. Therefore it is likely that BTC will hit bottom soon. For more information, watch this video:


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