- Vitalik Buterin took to Twitter today to criticize the infamous stock-to-flow bitcoin model popularized by pseudonymous investor PlanB.
- The model famously predicted that bitcoin would reach a price of $100,000 by December 2021, inviting criticism after the market invalidated it.
- Buterin explained that if PlanB’s model were applied to Ethereum after the “merge” upgrade, its price would be a real number that does not “exist” in nature.
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Ethereum inventor Vitalik Buterin has described the infamous bitcoin stock-to-flow model as “damaging,” adding that flawed financial models “are worth all the fun they get.”
Vitalik Buterin slates PlanB’s stock-to-flow model
Vitalik Buterin has taken a shot at the bitcoin stock-to-flow model that gained popularity during the 2021 bull run.
Stock-to-flow isn’t really looking good now.
I know it’s rude to boast and all that, but I think financial models that give people a false sense of certainty and predictability that number-wish-ups are harmful and deserve all the ridicule they get. . https://t.co/hOzHjVb1oq pic.twitter.com/glMKQDfSbU
— vitalik.eth (@vitalikbuterin) 21 June 2022
The Ethereum co-founder took to Twitter today to criticize the now-infamous, now-invalid model popularized by notorious Dutch investor PlanB. “Stock-to-flow really isn’t looking good now,” he Told, adding that “financial models that give people a false sense of certainty and predictability that number-increasing are harmful and that they all deserve ridicule.” Expressing his criticism, Buterin was quoting the independent Ethereum educator and founder of The Daily Gui Podcast, Anthony Sasano, Joe Told That PlanB’s model was “such a failure” that they should consider deleting their account.
The stock-to-flow model famously predicted that bitcoin would reach $100,000 by December 2021 and attracted attention as the asset led a rally in the crypto market. This was first visualized by PlanB in a March 2019 blog post titled “Modeling Bitcoin Value with Scarcity (S2F).” The article described a new way of predicting bitcoin’s valuation and its price based on the relationship between the asset’s stock and inflows, whereby stocks are the total size of existing stockpiles or reserves of the asset, while inflows reflect the annual output or coinage. issue, issue. Claiming that there was a statistically significant relationship between bitcoin’s stock-to-flow ratio and its market cap, the model predicted the price of bitcoin to be $55,000 after the May 2020 halving event and $100,000 by December 2021. guessed. “I would call s2f invalid if we have not reached 100K by December this year, we cannot stay at current levels for the rest of the year,” PlanB tweeted In June 2021, only to back down from his claim after bitcoin failed to reach its predicted target.
Invalid stock-to-flow model
Several notable industry figures have criticized PlanB and the stock-to-flow model in the past. Some have argued that it does not account for price-influencing factors such as demand, while others have stated that it is not supported by empirical evidence or scientific reasoning. Buterin highlighted in a follow-up, mocking the model’s flawed assumptions. Tweet If the model was applied to Ethereum after the “merge” of Proof-of-Stake, the stock-to-flow ratio would be negative 55, meaning it would take approximately 55 years to burn all Ethereum in existence. This will make the price of ethereum -47610 – 101177*i—a real number which does not “exist” in nature.
plan b reacted For Buterin’s initial post on Twitter, calling on leaders “Being a victim of blaming others and playing the victim.”
The latest criticism of the stock-to-flow model comes as bitcoin suffers its eighth month of sluggish price action. The top crypto is currently trading for around $21,000, which is about five times less than PlanB’s projected price target for June 2022.
Disclosure: At the time of writing, the author of this feature holds ETH and several other cryptocurrencies.