Bitcoin’s stock-to-flow or as more popularly known as the S2F model is one controversial model when it comes to predicting the cryptocurrency’s price movements. In the latest development, a prominent exec in the cryptocurrency realm opined that the S2F model is broken.
Eric Wall, who happens to be the Chief Investment Officer of crypto hedge fund Arcane Assets, noted that Bitcoin would not reach even 50% of its target range determined by the stock-to-flow, or S2F model. The CIO went ahead to lay down the terms of the bet and offered to pay $1 million to anyone who accepts his argument that the model that will be “broken” in less than five years.
There are numerous predictive models that have been trying to guess the next move of the world’s largest cryptocurrency, but one, in particular, has become really popular and most debated The Stock to Flow model is one of the most used models to predict the movement of Bitcoin. This model uses Bitcoin halving events as a tool to determine the price of the crypto-asset in the long-term. Since Bitcoin has a fixed monetary supply, the biggest value proposition of the cryptocurrency is its scarcity and the decline in supply.
The latest comments emerged after the S2F creator who is known as “Plan B” reiterated his belief in the model and said that the current trend suggested that if BTC’s price follows the S2FX model it could be nearly $100k by December 2021.
People ask if I still believe in my model. To be clear: I have no doubt whatsoever that #bitcoin S2FX is correct and #bitcoin will tap $100K-288K before Dec2021. In fact I have new data that confirms the supply shortage is real. IMO 2021 will be spectacular. Not financial advice! pic.twitter.com/GNSxLIt7NG
— PlanB (@100trillionUSD) November 8, 2020
When Blockstream’s Adam Back asked Wall if he meant that Bitcoin would stay under $288K for the next five years, Wall went on to clarify that,
“The S2FX model is much more ridiculous than that, it actually predicts $5m/coin in less than 5 years. To set a ‘range’ I think he uses the old S2F model as the bottom threshold ($1.4m). 50% of that would be $700k by Nov 2025. Odds are 1:1, easy money given the ‘certainty’.”
This is not the first time that the model has been criticized as outlandish by prominent figures of the industry. Previously, Nico Cordeiro, the CIO at Strix Leviathan, yet another crypto hedge fund, had stated that the model is based on the rather strong assertion that the USD market cap of a monetary good is derived directly from their rate of new supply, from a theoretical foundation. However, he alleged that other than the singular data points selected to chart gold and silver’s market capitalization against Bitcoin’s trajectory, no evidence or research was provided to support this argument.