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Vitalik Buterin mocks Bitcoin’s “stock-to-flow” model amid price drop

Vitalik Buterin is the latest notable industry figure to speak out on the invalid stock-to-flow model.

The central theses

  • Vitalik Buterin took to Twitter today to share the infamous Stock-to-FlowBitcoin-Criticize model popularized by pseudonymous investor PlanB.
  • The model famously predicted that Bitcoin would reach a price of $100,000 by December 2021, which drew criticism after it was invalidated by the market.
  • Buterin pointed out that if PlanB’s model were applied after its “Merge” upgrade, its price would be a surreal number that doesn’t “exist” in nature.

Ethereum Inventor Vitalik Buterin has called Bitcoin’s infamous stock-to-flow model “harmful” and said flawed financial models “deserve all the ridicule they get.”

Vitalik Buterin presents PlanB’s stock-to-flow model

Vitalik Buterin has captured footage of Bitcoin’s stock-to-flow model, which has gained popularity throughout the 2021 bull run.

Vitalik Buterin mocks Bitcoin’s “stock-to-flow” model amid price drop, Crypto Trading News

Vitalik Buterin tweet

The Ethereum co-founder took to Twitter today to criticize the infamous, now invalid, model popularized by pseudonymous Dutch investor PlanB. “Stock-to-flow really isn’t looking good right now,” he said, adding that “financial models that give people a false sense of certainty and predetermination that the numbers will go up are harmful and deserve all the ridicule, which they get. ” Expressing his criticism, Buterin quoted the independent Ethereum educator and founder of The Daily Gwei Podcast, Anthony Sassano, who said PlanB’s model was “such an epic failure” that they should consider deleting their account.

The stock-to-flow model famously predicted that Bitcoin would hit $100,000 by December 2021 and attracted attention as the asset led a rally in the crypto market. It was first conceived by PlanB in a March 2019 blog post titled “Modeling Bitcoin Value with Scarcity (S2F)”. The article outlined a new way of valuing Bitcoin and predicting its price based on the relationship between the asset’s inventory and flow, where inventory is the total size of the asset’s existing inventories or reserves, while flow is the annual production or denotes coin issue. Claiming that there is a statistically significant relationship between Bitcoin’s stock-to-flow ratio and its market price, the model predicted Bitcoin’s price to reach $55,000 after its halving in May 2020 and $100,000 by December 2021 By December of this year, we cannot stay at current levels for the rest of the year,” PlanB tweeted in June 2021, only to retract its claim after bitcoin failed to meet the projected target.

Stock to flow model invalid

Many well-known industry figures have criticized PlanB and the Stock-to-Flow model in the past. Some have argued that it doesn’t take into account price-influencing factors such as demand, while others said it’s not backed by empirical evidence or scientific logic. Buterin scoffed at the model’s flawed assumptions, and in a follow-up tweet stressed that if the model were applied to Ethereum after the “merge” to proof-of-stake, the stock-to-flow ratio would be negative 55, meaning that it would take about 55 years to burn up all Ethereum exists. This would give Ethereum a price of -47610 – 101177*i – a surreal number that does not “exist” in nature.

PlanB responded to Buterin’s initial post on Twitter, calling out executives who “fall victim to blaming others and playing the victim.”

The latest criticism of the stock-to-flow model comes as Bitcoin suffers from its eighth month of sluggish price action. The top crypto is currently trading for around $21,000, around five times below PlanB’s June 2022 price target.

Source: Crypto News Deutsch

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