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Ethereum (ETH) co-founder Vitalik Buterin has criticized the Stock-to-Flow (S2F) model for predicting and measuring the value of Bitcoin (BTC), claiming that it creates a false sense of financial security about the digital asset’s value.
According to Buterin, financial models like the S2F give people false assurance that the “number will go up” before adding that such models “are harmful and 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
What is Plan B’s stock-to-flow model?
Crypto analyst Plan B developed the now infamous stock-to-flow model. The model quantifies the value of an asset based on its scarcity. Although originally used for precious metals such as silver and gold, Plan B used it to predict that Bitcoin value would increase 10x every four years.
It gained widespread attention last year when it correctly predicted the future prices of Bitcoin during the bull run, despite minor deviations. But critics claim the major problem with the theory is that it only considers the supply aspect of BTC while assuming demand will keep growing.
Using the model, Plan B predicted that Bitcoin would reach $100k by the end of 2021; however, the coin only touched an all-time high of $69,000 in November before crashing.
Bitcoin’s decline shines a light on the S2F model
With Bitcoin’s price recovering from its crash to under $20,000, crypto analysts are beginning to take a more cursory look at the S2F model.
The 'Stock to flow' model is such an epic failure that PlanB should just delete his account
He won't though because he sadly still has 1.8 million followers who eat up all of his hopium garbage on a daily basis
— sassal.eth 🦇🔊🐼 (@sassal0x) June 21, 2022
According to Sassal, the S2F model has been an “epic failure,” adding that Plan B should delete his Twitter account.
Reminds me of the false 'mathematical' models @hashed_official posted to con people into thinking UST demand would grow exponentially and LUNA would hit insane price targets like $1,000 pic.twitter.com/T7PIyTULmj
— FatMan (@FatManTerra) June 21, 2022
FatManTerra also used the opportunity to criticize the “mathematical” models that predicted that LUNA’s value could reach $1,000.
Plan B responds
Plan B has responded to the many criticisms of his S2F model, saying that “people are looking for scapegoats.”
After a crash aome people are looking for scapegoats for their failed projects or wrong investment decisions. Not only newbies but als "leaders" fall victim to blaming others and playing the victim. Remember those who blame others and those who stand strong after a crash. https://t.co/4nJdHq84pm
— PlanB (@100trillionUSD) June 21, 2022
Plan B continued that “leaders” in the space like Vitalik Buterin are “blaming others and playing the victim.”
#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
On June 20, Plan B shared a graph showing that the S2F model was accurate between March 2019 and March 2022 and said that “either BTC is extremely undervalued and will bounce back soon, or S2F will be less useful in the future.”