S2F paradigm of Bitcoin creates a false sense of assurance, says Vitalik Buterin

21-Jun-2022 By: Simran Mishra

S2F paradigm of Bitcoin creates a false sense of assurance, says Vitalik Buterin

BTC stock-to-flow (S2F) model pioneered by a pseudonymous Dutch institutional investor known as PlanB has been challenged by Ethereum co-founder Vitalik Buterin.

During the bull market, the BTC stock-to-flow model attracted a lot of attention since it correctly predicted multiple price movements. However, the model also strayed on several instances.

The S2F model, which calculates an asset's price based on scarcity, was first developed for popular metals like gold and silver. PlanB's well-known BTC S2F model predicts that BTC's price will continue to rise steadily and impressively, with tenfold returns every four years.

Many opponents have pointed out that the S2F model has a one-sided estimate problem, in which it only considers the supply side of BTC while assuming that demand would continue to rise.

While BTC demand has increased dramatically, other variables like as inflation, which has been supported by the Fed's money creation frenzy, have had a considerable impact on consumers' purchasing power. As a result, the S2F model ignores a number of macroeconomic factors that have a significant impact on market sentiment.

People are seeking for scapegoats for their failing enterprises or bad investment decisions, according to Plan B's response to Buterin's criticism.

BTC was expected to reach $100,000 by the end of December 2021, according to the S2F model. While he had previously stated that the model would have weaknesses due to external circumstances, the model's popularity during the peak bull run knocked down most opposition.

The discussion of faulty financial models comes as BTC has dropped to a fresh four-year low of $17,592. The BTC was trading at $21,269 at the time of writing, up 3.17% in the last 24 hours.

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