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Vitalik Buterin attacks the Bitcoin pricing model

Vitalik Buterin, the creator of Ethereum, has taken aim at the contentious Bitcoin price model Stock-To-Flow (S2F). Buterin believes the strategy is “not looking good” and has openly attacked it for providing cryptocurrency investors with a “false sense of certainty.”

According to Buterin, this creates the illusion that Bitcoin will always move upward. As evidenced by recent market movements, this could result in many people losing their initial investment and more. Buterin stated on Twitter when displaying the following chart:
”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 numbers will go up are harmful and deserve all the mockery they get. Stock to Flow model.

As seen in the chart, this model, developed by pseudonym analyst Plan B, anticipates that the price of Bitcoin will hit $100,000 by the end of 2021. The model varied as Bitcoin fell in value later that year, and many regards it as a failure.

Buterin and other detractors claim the model ignores other important aspects and only forecasts BTC’s price to the upside in the near future. For example, it failed to forecast what would happen to Bitcoin in the current economic environment, which includes a drop in global liquidity and an increase in interest rates by the United States Federal Reserve (Fed).

In reaction to Buterin’s remark, Plan B, the creator of the S2F Model, stated:

“After a crash, some people are looking for scapegoats for their failed projects or wrong investment decisions. Not only newbies but also “leaders” fall victim to blaming others and playing the victim. Remember those who blame others and those who stand strong after a crash.”

Is It Possible To Predict Bitcoin’s Price?

Plan B has updated its S2F model and now refers to both the original 2019 version and the new S2F version. Both variants forecast a BTC price heading upward in 2022 and for the foreseeable future, as seen below.

If BTC remains at current prices, around or below $20,000, the analyst believes the S2F model will be “less useful” in the coming months. The other possibility is that BTC is “very undervalued and will shortly recover.”

Plan B stated about the efficiency of the S2F and any other model used to predict financial performance: Prediction is hard, especially in the future. EMH even says predicting financial markets is impossible

 Later, when the debate over the S2F model heated up, Plan B added:

So I share my analysis and charts FOR FREE. Never told anybody to buy or what/when/how/how much to buy. Now covid, China ban, Russia war and inflation tank all assets including bitcoin … and somehow some weeners blame their investment decisions on me? Lame.

Vitalik Buterin attacks the Bitcoin pricing model

Nonhlanhla P Dube

Nonhlanhla P Dube is a senior news reporter at Rateweb. Nonhlanhla is a student of International Relations at the University of South Africa. She reports primarily on personal finance and economics. You can contact her directly by email at [email protected]

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