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Bitcoin S2F model gives false sense of certainty, says Vitalik Buterin

Bitcoin S2F model gives false sense of certainty, says Vitalik Buterin

Ethereum co-founder Vitalik Buterin has criticized the controversial bitcoin (BTC) stock-to-flow (S2F) model, popularized by a pseudonymous Dutch institutional investor known as PlanB.

The BTC stock-to-flow model attracted a lot of attention during bull markets because it had many price predictions accurate, however, the model deviated on several occasions even during bull markets.

Buterin joins a growing list of critics of the model that aims to predict the price of BTC:

The S2F model determines the price of an asset based on its scarcity and was primarily used for popular metals such as gold and silver. PlanB’s popular BTC S2F model suggests that the price of BTC will continue on a stable and impressive path with returns of around ten times every four years.

The key problem with the S2F model that many critics have pointed out is the one-sided estimation, where it only takes into account the supply side of BTC, while assuming that demand will continue to grow.

related: Vitalik Buterin shares his thoughts on non-financial use cases for blockchain

While demand for BTC has seen a significant increase, other factors such as inflation aided by the Fed money printing spree have significantly impacted the purchasing power of consumers. Thus, the S2F model does not take into account many macroeconomic factors that mostly influence market sentiments.

Plan B responded to Buterin’s criticism by claiming that “people are looking for scapegoats for their failed projects or wrong investment decisions.”

According to the S2F model, BTC was set to touch the $100,000 mark by the end of December 2021. Although they have acknowledged in the past that there would be some flaws driven by external factors, the model’s popularity was pushed down during the peak bull run. Most criticized.

The debate about the faulty financial model comes at a time when BTC recorded a new four-year low of $17,748. The top cryptocurrency was trading at $21,321 at the time of publication, registering a 4% increase over the past 24 hours.

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Bitcoin S2F model gives false sense of certainty, says Vitalik Buterin

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