According to Ethereum co-founder Vitalik Buterin the stock-to-flow model that predicts bitcoin value at above $100k before 2021 is “rationalized bullshit.”
“Your daily reminder that 95%+ of articles of the form “event X will make crypto go (up | down)” are post-hoc rationalized bullshit,” said Buterin adding, “Also this gleeful watching of every disaster (coronavirus) as a potential source of moon continues to be just creepy….”
On being asked about the stock-to-flow model, Buterin said, “that stuff is part of the 95%.”
Analyst PlanB who used the model to determine bitcoin value said,
“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.”
Using Stock-to-Flow to predict prices is absolute nonsense
Just last week, the crypto hardware wallet manufacturer Trezor bashed the model saying, “using Stock-to-Flow to predict prices is absolute nonsense.”
According to Trezor, mathematically the model is “convincing” and the idea is “impressive” but has several issues that don’t make it at all useful.
It argues that the stock-to-flow model does not take the demand side into account when the price is actually the result of supply and demand. “If the demand for Bitcoin falls, the price will drop even at the same Stock-to-Flow,” said Trezor.
Also, the model puts the value of bitcoin higher than the GDP of all countries in the world in the next few decades and at an infinite value sometime in the future, a scenario PlanB has called hyperbitconization.
“Scarcity is a necessary but not sufficient condition of value. The Stock-to-Flow model correctly draws attention to scarcity but omits the second necessary variable from the equation. As a result, it is unusable to predict the price and remains just a wish of all Bitcoin fans,” said Trezor.