Ethereum's Vitalik Buterin Now Bitcoin Price Analyst Too
Ethereum (ETH) Co-founder Vitalik Buterin keeps criticizing the stock-to-flow (S2F) model, though agreeing that a lack of correlation between the rise in bitcoin (BTC) price and the coin's halving isn't enough to do away with this popular and disputed model.
The theory that the halving causes a price rise is "unfalsifiable" due to the inconsistency in price increases, Buterin tweeted on Sunday.
The "halvings cause BTC price rises" theory is unfalsifiable:— vitalik.eth (@VitalikButerin) June 14, 2020
Was the peak before the halving? Then it "rose in anticipation of the halving"
During? "Because of the halving"
After? "Because of..."
The last $20k peak was near the halfway point between the 2016 and 2020 halvings. pic.twitter.com/dhVxhmECQS
PlanB, the model's author, disagreed with Buterin's opinion, writing that in the S2F terms, halvings make BTC scarcer, arguing that it's more about the average price levels than the peaks.
I beg to differ. Halvings make BTC scarcer (in S2F terms) and scarce assets (BTC, gold, silver etc) seem to have a higher value than non scarce assets. It is not so much about the peaks (those are caused by greed and fomo), but the average price levels.https://t.co/cQEv7Qvu64— PlanB 🔴 (@100trillionUSD) June 15, 2020
Quite a discussion has been led following the statement, with the model's supporters, critics, and those in between chiming in. In reply to Buterin, Twitter user Ricardo Lopes argues that the lack of correlation argument is not sufficient to disprove the model because "it's not what the model projects. "It doesn't seem to imply a peak is due to the halving event, rather that each period between halvings sees different orders of magnitude due to different supply," he writes, and adds: "Falsifiable if that no longer happens on a new period."
All this goes back to multiple narratives surrounding Bitcoin halvings, as well as possible outcomes, one of the most popular of which is that the coin's price will significantly rise. According to the stock-to-flow model, when a halving happens, the stock-to-flow ratio doubles and the model price increases.
Per this model, Bitcoin was initially set to jump to USD 100,000 before Christmas 2021. Also, according to the updated model, Bitcoin will hit USD 288,000 in a few years. Just two weeks ago, the model was updated with a new data point - a red dot - indicating that the new bull cycle has seemingly begun and BTC might reach USD 100,000 in a year.
Meanwhile, as reported, in four years since the second halving in 2016, BTC price increased by 1,364%.
This is not the first time Buterin criticized the S2F model, as he expressed his dislike for it as a tool to predict BTC's price before. PlanB said at the time that the Ethereum Co-founder ought to be a critic, as liking S2F would mean saying ETH has no value.
You can call stock-to-flow model rationalized bulls**t or absolute nonsense but that's not how math/stats works: the proven cointegration is still there, everybody can verify it, until you prove it wrong. But I get Vitalik: liking S2F = saying ETH has no value, ofc he is a critic— PlanB 🔴 (@100trillionUSD) February 27, 2020
Furthermore, Buterin is not the only member of the community with a dose of skepticism, as this group includes the well-known Bitfinex trader J0E007 who said that the second model is a step in the right direction, as well as Eric Wall, Chief Investment Officer at crypto asset management firm Arcane Assets, who claimed that the S2F model is based on the flawed logic that “almost no one understands.”
At pixel time (11:39 UTC), BTC trades at USD 9,143 and is down by 3% in a day and by 6% in a week. The price dropped by 3% in a month, erasing almost all its gains in the past 12 months.
Here are a few more reactions from this ongoing debate:
Can we really call them bubbles? Price rises and falls for certain, but it always leads to gains in interest and adoption, and each is bigger than the last. They are more than mere bubbles. Next one should be appearing in about a year. Halving probably has some effect— Eric (@Eric65878189) June 14, 2020
The market has changed. S2F misconception by many reasons. Main problem with S2F model is that it's predict that BTC price invariantly tend to $infinity, but this is nonesense, since there will exist 21000000 $infinities.https://t.co/xbLNxE6WMq— Bitcoin Theory (@TheoryBitcoin) June 14, 2020
Precision in price discovery doesn't matter. Everything averages out over time. In between market making activtities will test the supply/demand on both sides of the market depending in available liquidity (btc or base curreny) in most principal exchanges.— D7R (@d7rader) June 14, 2020
The sample size is just too small.— allyourbase 🍏 The Finger of Brrrromo (@allyouracid) June 14, 2020
And the bad thing about this is that once the sample size got big enough to strengthen the correlation, the halvings' impact will be too small to really make a difference^^