Bitcoin model gives false sense of certainty, says Vitalik Buterin

Vitalik Buterin Bitcoin

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Categories: Bitcoins

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.

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 steady and impressive path with returns of around ten times every four years.The key problem with the S2F model, which has been pointed out by many critics, is the one-sided estimation where it only takes into account the supply side of BTC, while assuming that demand will continue to grow. According to the S2F model, BTC is expected to touch the $100,000 mark by the end of December 2021.

While they have acknowledged in the past that there will be some flaws driven by external factors, the model's popularity during peak bull runs brushed most of the criticism down. 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.

While BTC demand has shown significant growth, other factors similar as affectation backed by the Fed have publishing spree have significantly affected the buying power of consumers. therefore, the S2F model does n’t take into account several macroeconomic factors that basically affect the request sentiments.

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