Ethereum (ETH) co-founder Vitalik Buterin has criticized the Stock-to-Flow (S2F) model for predicting and measuring the value of bitcoin (BTC), arguing that it creates a false sense of financial security regarding the digital asset’s value.
According to Buterin, financial models such as S2F give people false confidence that “the number will rise” before adding that such models are “harmful and deserve all the ridicule they receive.”
Stock-to-flow doesn’t look good right now.
I know it’s impolite to gloat and all, but I think financial models that give people a false sense of certainty and predestination that the number will rise are harmful and deserve all the ridicule they receive. https://t.co/hOzHjVb1oq pic.twitter.com/glMKQDfSbU
— vitalik.eth (@VitalikButerin) June 21, 2022
What is the Plan B stock-to-flow model?
Cryptanalyst Plan B developed the now infamous Stock-to-Flow model. The model quantifies the value of an asset based on its rarity. While it was originally used for precious metals like silver and gold, Plan B used it to predict that the value of bitcoin would increase 10x every four years.
He gained wide attention last year when he correctly predicted the future prices of bitcoin during a bull market despite minor deviations. But critics argue that the main problem with the theory is that it only looks at the supply side of BTC, assuming demand will continue to rise.
Using the model, Plan B predicted that Bitcoin will hit $100k by the end of 2021; however, the coin only hit an all-time high of $69,000 in November before crashing.
Bitcoin Fall Sheds Light on S2F Model
As the price of Bitcoin recovers from the crash to below $20,000, cryptanalysts are starting to look at the S2F model more superficially.
The stock to flow model is such a massive failure that PlanB should simply delete their account.
But he won’t because, unfortunately, he still has 1.8 million subscribers who eat all his opium rubbish daily.
– sassal.eth 🦇🔊🐼 (@sassal0x) June 21, 2022
The S2F model was an “epic failure,” Sassal said, adding that Plan B should delete his Twitter account.
Reminds me of false “math” models @hashed_official published to fool people into thinking that demand for UST will grow exponentially and LUNA hit insane price targets like $1,000. pic.twitter.com/T7PIyTULmj
– Fat Man (@FatManTerra) June 21, 2022
FatManTerra also took the opportunity to criticize “mathematical” models that predicted LUNA could cost as much as $1,000.
Plan B answers
Plan B responded to numerous criticisms of its S2F model by stating that “people are looking for scapegoats.”
After a crash, some people look for scapegoats for their failed projects or poor investment decisions. Not only beginners, but also “leaders” fall prey to blaming others and playing the victim. Remember those who blame others and those who remain resilient after an accident. https://t.co/4nJdHq84pm
— PlanB (@100trillionUSD) June 21, 2022
Plan B continued that “leaders” in the space, such as Vitalik Buterin, “blame others and play the victim.”
#bitcoin The original 2019 S2F model (grey) and the latest model corresponding to the latest data (white dots). The S2F model certainly performed well from March 2019 (4,000 BTC) to March 2022 (45,000 BTC). For now: either BTC is grossly undervalued and will recover soon, or S2F will be less useful going forward. pic.twitter.com/JdnLINpzTV
— PlanB (@100trillionUSD) June 20, 2022
June 20, plan B general a chart showing that the S2F model was accurate between March 2019 and March 2022 and says “Either BTC is grossly undervalued and will recover soon, or S2F will be less useful going forward.”
Credit : cryptoslate.com