Ethereum‘s enigmatic co-founder, Vitalik Buterin, has been largely vocal in space over the last few months. Although most of his remarks were based on the development of Ethereum 2.0, his most recent comment was in disagreement with Bitcoin’s quant analyst.
Buterin ‘s recent opinion came on Twitter, criticizing Bitcoin’s Stock-to-Flow model. He indicated that he understood the functionality of the S2F model, but did not believe that a post-halving rise for Bitcoin would take place because the block rewards of miners have been reduced to half.
What is Bitcoin’s Stock-to-Flow model?
Developed by anonymous Bitcoin analyst PlanB, the Stock-to-Flow or S2F model is based on the scarcity characteristics of Bitcoin, where its value is measured in terms of outstanding supply against market inflows.
This model of prediction has been widely used over the last few years to predict the price of Bitcoin after the recent halving. The model argued that the value of Bitcoin would increase after halving, as the supply of BTC would decrease in the industry. Some users believed in this BTC theory as Bitcoin had surged up to an all-time high of $20,000 in 2017, right after its halving in 2016.
Now, according to his recent analysis, PlanB had implied that Bitcoin’s price will possibly sky-rocket all the way to $288k by 2024.
However, Ethereum’s Buterin disagreed with this prediction based on one fundamental flaw around S2F. Vitalik tweeted,
The "halvings cause BTC price rises" theory is unfalsifiable:
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
— vitalik.eth (@VitalikButerin) June 14, 2020
According to the above tweet, Buterin believed that the S2F theory is unfalsifiable or in simple terms, it is impossible to disapprove. However, he stated that because he believed that analysts can associate any value of Bitcoin as evidence that the S2F model is accurate. Hence, without any coherent correlation, the model is not exactly helpful.
After Buterin’s statement, PlanB responded to his criticism and replied,
“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.”
So, is Vitalik right over the S2F prediction?
At the moment, none of them is particularly correct with their analysis. Buterin is basing his assumptions by disapproving the first assumption of S2F, where Bitcoin has been strictly adhered to as a commodity. Hence, invalidating the theory by taking out its principle attribute is probably not the right step forward.
However, it is far from certain that Bitcoin will reach $288k by 2024 based on the S2F model. Therefore, only with time, the future of Bitcoin will attain better clarity.