What’s Up With Bitcoin Stock To Flow


One of the most fascinating aspects of bitcoin is its historical meteoric price rise. Is bitcoin going to continue on this historical path or is growth going to slow, or even halt?

The stock-to-flow (S2F) model, put forward by PlanB, suggests that bitcoin’s future price can be forecast quite precisely and that the price will continue a steady and impressive path upwards, with approximately tenfold returns every four years. The S2F model has attracted a lot of attention, and PlanB has amassed an impressive number of followers (1.7 million at the time of writing).

Perhaps in part due to its popularity, the model has more recently been met with a lot of criticism. An example of such criticism is a harshly-worded recent article published in Bitcoin Magazine. Also, in July 2020, Eric Wall put together a collection of criticisms.

It appears that most people find themselves in either of two camps: the “pro” S2F and the “con” S2F camps. How should we position ourselves?

Before I go on: I have written negatively about the S2F model since 2019, when I predicted that the S2F model’s predictions would prove too bullish. I have also exchanged with PlanB both publicly on Twitter (e.g. here), and privately. I have coauthored a more mathematical article together with InTheLoop, clarifying why we both think the S2F model is too bullish. It might therefore come as no surprise that I am not exactly in the S2F camp. However, I have also noticed that some of the criticisms towards the S2F are invalid. Other criticisms purport to deal a death blow to the S2F model, whereas in fact, they do not. I therefore hope to add some clarity. It is important to be right for the right reasons, because correct principles are our only chance of being right in the future.

Source link Bitcoin Magazine


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