Vitalik: Stock-to-Flow Model Seems Dubious, Giving the Illusion of Only Rising, Not Falling; PlanB's Response

Ethereum founder Vitalik Buterin pointed out on Twitter the deviation of the popular Bitcoin price prediction model Stock-to-Flow, emphasizing that the false sense of only rising and never falling brought to investors by the prediction is harmful. In response, the creator of the model, PlanB, fired back at Vitalik.

Vitalik: Models Not Looking Good

Vitalik expressed on Twitter:

The Stock-to-Flow (S2F) model is not looking good right now. I know it's impolite to gloat, but I believe that this kind of financial model that presents an absolute argument and claims that numbers will only go up is harmful. All the ridicule towards this model is well-deserved. Remember who supported the S2F in the past and who still dismisses it despite the S2F accurately predicting trends.

Stock-to-flow is really not looking good now.

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 number-will-go-up are harmful and deserve all the mockery they get. https://t.co/hOzHjVb1oq pic.twitter.com/glMKQDfSbU

— vitalik.eth (@VitalikButerin) June 21, 2022

This topic was initiated by Ethereum supporter and EthHub co-founder Anthony Sassano, and Vitalik retweeted and commented on the tweet. Sassano stated:

The S2F model is an epic failure. PlanB should delete his Twitter account, but he won't do that because sadly, he still has 1.8 million followers who day in and day out receive all his blindly optimistic garbage information.

The 'Stock to flow' model is such an epic failure that PlanB should just delete his account

He won't though because he sadly still has 1.8 million followers who eat up all of his hopium garbage on a daily basis

— sassal.eth 🦇🔊🐼 (@sassal0x) June 21, 2022

PlanB's Response

The inventor of the Stock-to-Flow (S2F) model, anonymous analyst PlanB, immediately responded on Twitter and replied:

After a market crash, everyone is looking for culprits for failed projects or wrong investment decisions. Not only newcomers to investing, but even "leaders" have turned into blaming others, innocent victims – this is a sign of weak mentality, not good for leaders. Remember those who only blame others, and those who remain strong even after a crash.

Various Perspectives

In 2020, Vitalik had criticized the S2F model multiple times, believing that the price increase is not directly related to the halving of block rewards, and emphasizing that over 95% of articles speculating on "what happened today that caused the rise/fall of cryptocurrencies" are just post hoc gibberish.

Below PlanB's tweet, there are still supporters, but some users urge PlanB to publicly acknowledge the failure of S2F because the model only quantifies scarcity to estimate future valuations without considering actual demand.

In his latest tweet, PlanB outlined two scenarios, suggesting that based on current trends, Bitcoin may be severely undervalued and could soon rebound, or the other scenario indicating that the S2F model is no longer accurate for the future.

The Block's Research Director, Larry Cermak, also joined the discussion, responding to Vitalik and sharing his statement from 2019:

Believing that Bitcoin's price is entirely dependent on scarcity is truly absurd; demand is the most crucial factor. S2F is a quality model for measuring scarcity, but the part about estimating valuations is terrible. S2F will become a joke in the next few years.