New ‘Red Dot’ and Criticism Hit Bitcoin S2F Model
As the widely followed pseudonymous bitcoin (BTC) analyst PlanB added another data point, the ‘red dot’ to his famous stock-to-flow (S2F) bitcoin price model, the community appears to be getting increasingly dismissive about the model’s predictions.
Writing on Twitter today, PlanB first shared the “cross asset” version of his model, dubbed S2FX, which does not enter into new phases immediately after halvings. Asked about this, however, the analyst then went on to share his traditional S2F model, which shows how the current price sits well below the model’s projected trajectory.
@hajek_miloslav I prefer S2FX model because cross asset validation. IMO original pure time series S2F narrows discu… https://t.co/MyLaK6Vyv4— PlanB 🔴 (@100trillionUSD)
New dots on the S2F model appear monthly, with the red dots specifically appearing immediately after a halving has taken place. The first red dot in this cycle was thus added a month ago.
PlanB’s S2F model famously predicts a price rise to USD 100,000 for bitcoin in a year, with further gains expected again after the next halving in 2024. The model works by looking at the reduction in supply of new coins to the market, using a similar logic as some analysts have applied to study price moves in commodities and precious metals markets.
Unlike how the situation was a few months ago when the model enjoyed widespread popularity in the cryptoverse, the community now appears to be getting even more skeptical about the validity of the model.
Once again, among the critics is Vitalik Buterin, Co-founder of Ethereum (ETH), who shared an article by Nico Cordeiro, Chief Investment Officer (CIO) at investment firm Strix Leviathan LLC, that picked apart the model in an effort to uncover how it is “fatally flawed.”
“[…] we believe that the model’s accuracy will likely be about as successful at forecasting Bitcoin’s future price as the astrological models of the past were at predicting financial outcomes,” Cordeiro said, before going into detail about the alleged flaws with the model.
He urged investors to “be highly skeptical of this model even if they believe Bitcoin is digital gold.”
“The SF paper is not proper empirical analysis, but more akin to a marketing piece in which the author is trying to convince readers that Bitcoin is going to be worth a lot more tomorrow. This may or may not turn out true, but it has little to do with Bitcoin’s supply schedule,” the CIO concluded.
@VitalikButerin I agree S2F does not dictate future value. However, it is more like a coefficient to the rate of gr… https://t.co/ZIwi5c0whb— Mohamed Gomah (@megomah)
Recently, responding to the criticism, however, PlanB reminded his followers that models are nothing more than a “simplification of reality,” and added that “all models are wrong” although “some are useful.”
@fvmgg You missed the point. S2F model is a simplification of reality, it only models the bare essence (scarcity),… https://t.co/9NgeLF5XXe— PlanB 🔴 (@100trillionUSD)
Other reactions and discussions
@hasufl @nic__carter @ercwl On what basis would you say it's utter nonsense? Isn't it far too early to say it's bee… https://t.co/vGIUJHoWzk— James Viggiano (@jamesviggy)
Confirmed. After my latest publication in which I discussed why cointegration doesn’t apply, I lost some followers.… https://t.co/sG5gBz4L60— ₿urger (@BurgerCryptoAM)
@ercwl my buying and holding is unaffected by s2f curve fitting or counter-arguments. i buy bitcoin because I want… https://t.co/13G9ZGpmlM— Adam Back (@adam3us)
@mikeinspace No, mate. Because Bitcoin "thot leaders" are mostly irresponsible self serving cult heads, who's only… https://t.co/lNHGW69QcV— Taha Zafar (@taha_zafar12)
@adam3us @mikeinspace Did you miss: - Cointegration tests were incorrectly used (according to cointegration expert)… https://t.co/zr5drEPlzz— Eric Wall (@ercwl)
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