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Why does the Stock-to-Flow model not look good to Vitalik Buterin now?


www.thecoinrepublic.com 22 June 2022 18:30, UTC
Reading time: ~2 m

Stock-to-Flow model has been used to determine bitcoin price but looking at its performance, people started distrusting the platform and mocking it

For quite some time now since the Stock-to-Flow model has been a topic of discussion all around. Earlier Ethereum co-founder Vitalik Buterin talked about it and recently he once again hit out on the bitcoin price model while calling it harmful.

On Tuesday, the co-founder of Ethhub, Anthony Sassao in his tweet described the stock-to-flow model as an epic failure. In response to his tweet, Buterin agreed and said that now the bitcoin price model is not looking good. 

Vitalik Buterin in his tweet wrote that he gets this and that it is not polite to gloat about it but he also thinks that those financial models gives a false sense of some certainty to people and predestination that prices will go up high, are harmful and such models deserve the mockery they are getting. 

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Stock-to-Flow model is developed by a crypto analyst dubbed as PlanB according to his Twitter handle. The S2F model predicts bitcoin’s price in future on the basis of its current circulating supply relative to the number of bitcoins that are mined each year. This number of mined bitcoins also gets reduced after every four years by 50% in a process called ‘halving’ or the bitcoin halving. 

Stock-to-Flow predicted that bitcoin would rise up to $288,000 till 2024 and put the reason as scarcity of bitcoin for this. The model stated that scarcity of bitcoin is similar to gold and such other commodities having limited supply and this creates the base for upcoming growth in its value. 

The reason why this Stock-to-Flow model is not trustworthy and seems to be superfluous is because of its recent predictions and those went super wrong. It has proven to deviate from its track clearly, last year itself when the model predicted that bitcoin price would touch the $100,000 mark by the end of 2021, that did not happen apparently. 

It was last week itself when Vitalik Buterin criticized PlanB’s S2F model. The model also predicts now that bitcoin would trade within $100,000 to $110,00 range for the year 2022, that is clearly visible how far right it is. Bitcoin price recently dropped to its 18 month low and traded below $20,000 last week. Such instances are enough to doubt the credibility and accuracy of the Stock-to-Flow model. 


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