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Why The Inventor Of Ethereum Attacked This Bitcoin Pricing Model

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Ethereum inventor Vitalik Buterin took target Bitcoin’s controversial Stock-To-Flow (S2F) pricing model. Buterin believes the model “doesn’t look good” and has openly criticized it for giving crypto investors a “false sense of confidence”.

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According to Buterin, this creates the illusion that bitcoin will constantly rise. As recent price action has shown, this can cause many people to lose their initial investment and more. Buterin said via his Twitter account, presenting the following chart:

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.

Bitcoin BTC BTCUSD Ethereum
Stock to flow model. Source: Vitalik Buterin on Twitter
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Created by an analyst under the pseudonym Plan B, as seen in the chart, this model predicted that the price of BTC would reach $100,000 by the end of 2021. The model was rejected as bitcoin began to decline later that year and is considered by many to be a failure.

Detractors such as Vitalik Buterin believe that the model does not take into account other key variables and only predicts the BTC price to rise in the near future. For example, he failed to predict what would happen to bitcoin in the current economic environment, with global liquidity shrinking and the US Federal Reserve (Fed) raising interest rates.

In response to Buterin’s comment, the inventor of the S2F model, Plan B said:

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.

BTC price is trending down on the 4-hour chart. Source: BTCUSD Trading Review

Is it possible to predict the price of bitcoin?

Plan B has made changes to their S2F model and now references the original 2019 version and the new S2F version. As seen below, both versions predict an increase in the price of BTC in 2022 and for the foreseeable future.

The analyst said that if BTC stays at its current levels, near or below $20,000, the S2F model “will be less useful” in the coming months. Another scenario is that BTC is “grossly undervalued and will recover soon.”

On the effectiveness of S2F and any other model used to predict financial results, Plan B said:

Predicting is difficult, especially the future. EMH even says that it is impossible to predict financial markets.

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Later, when talk of the S2F model flared up, Plan B added:

That’s why I share my analysis and charts for FREE. Never told anyone to buy or what/when/how/how much to buy. Now covid, china lockdown, war in russia and inflation are draining all assets including bitcoin… and for some reason some wimps are blaming me for their investment decisions? Lame.

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