Vitalik Buterin: Stock-to-Flow Bitcoin Price Model 'Really Not Looking Good Now'

Ethereum creator Vitalik Buterin has once again hit out at the much-discussed stock-to-flow (S2F) price model for Bitcoin, calling it "harmful."

Quoting a Tuesday tweet by Ethhub co-founder Anthony Sassano, who described stock-to-flow “an epic failure,” Buterin agreed that the price model “is really not looking good now.”

“I know it's impolite to gloat and all that, but I think financial models that give people a false sense of certainty and predestination that number-will-go-up are harmful and deserve all the mockery they get,” wrote Buterin.

What is the stock-to-flow model?

Developed by a crypto analyst going by the Twitter handle PlanB, the stock-to-flow model predicts the future price of Bitcoin based on its circulating supply relative to the amount of coins mined each year, which decreases by 50% each four years through a mechanism known as “halving.”

The model, which predicts that the leading cryptocurrency could rise to as much as $288,000 by the end of 2024, argues that Bitcoin’s scarcity—similar to that of gold and other commodities with limited supply—lays the ground for future increases in value. However, it began to clearly deviate from its trendline at the end of the last year as its projected price tag of more than $100,000 never happened.

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Buterin criticized S2F last week, arguing that “the ‘halvings cause BTC price rises’ theory is unfalsifiable,” in other words, that any price can be seized on as evidence that the stock-to-flow model is correct.

The S2F model predicts that 2022 will see Bitcoin trading within the $100,000 and $110,000 range; however, the latest market crash brought the price to an 18-month low beneath $20,000 last week, casting doubt on the model's accuracy.

At time of going to press, Bitcoin is changing hands at around $21,500, up 5% over the last day, per CoinMarketCap.

PlanB snaps back

PlanB, the author of the S2F model, was quick to respond to Buterin’s remarks, saying that the market’s slump made some people look for “scapegoats for their failed projects or wrong investment decisions.”

According to him, not only those new to the crypto space, but also the "leaders" tend to “fall victim to blaming others and playing the victim.”

“Remember those who blame others and those who stand strong after a crash,” added PlanB.

In an earlier tweet, PlanB defended S2F, arguing that the original model “certainly had a good run” from March 2019 to March 2022.

As for the current market, PlanB reckons that “either BTC is extremely undervalued and will bounce back soon, or S2F will be less useful in the future.”