Vitalik Buterin criticizes stock-to-flow model and generates controversy with PlanB

Analyst PlanB gained fame with his Stock-to-Flow (S2F) pricing model, in which he predicted that the price of Bitcoin (BTC) would reach $100,000. In fact, the famous analyst reiterated several times that this would still occur in 2021.

However, BTC did not follow the model as expected; on the contrary, the price faces a correction of 74% from its all-time high. The flaw in his prediction led several people to harshly criticize PlanB and its model, including Ethereum (ETH) founder Vitalik Buterin.

Buterin took advantage of the recent market slump and attacked the S2F model, calling it a “complete failure”. The creator of S2F responded quickly and did not hold back, but admitted the possibility that the model will not be useful in the future.

Model S2F and its criticisms

This Tuesday (21), Buterin wrote two tweets in which he talked about S2F.

In the first of them, the creator of Ethereum retweeted a message that classified the model as a “total failure”. Buterin got straight to the point and criticized the model for inducing a false sense of certainty.

“I know it’s impolite to brag and all that. But I think financial models that give people a false sense of certainty and predestination that the price will go up are harmful and deserve all the mockery they get,” Buterin said.

Along with the message, Buterin released a chart showing S2F projections and the evolution in the price of BTC. It is possible to notice that, according to the model, the price of BTC should be in the range of US$ 100, but now it is worth just over 20%.

Comparison between S2F model (straight line) and BTC price (dotted line). Source: Vitalik Buterin/Twitter.

Reply from PlanB

Naturally, the model’s creator didn’t take long to respond to the tweet. PlanB shared your answer along with Vitalik’s original message and gave it a heavier critique.

While Buterin abstained, PlanB called Ethereum a “failed project”.

“After a crash, some people look for scapegoats for their failed projects or bad investment decisions. Not only novices, but also “leaders” are victims of blaming others and playing the victim. Remember those who blame others and those who remain strong after an accident,” she said.

The analyst admitted that the model performed “well” for three years (from 2019 to March 2022), but deviated from its trajectory.

With that, the analyst said that there are two possible conclusions from the current scenario. “Either BTC is extremely undervalued and will recover soon, or S2F will be less useful in the future.”

about the model

Developed and published in March 2019, S2F and its variations predict the future price of BTC based on the size of existing reserves (stocks) and the annual supply of BTC on the market (flow).

The model itself is not new and has already been used to define the relationship in other commodities. Saifedean Ammous, author of the book The Bitcoin Pattern, already mentioned the model in 2018. But PlanB was the first to create a methodology adapted for BTC.

In the beginning, the model hit several BTC price predictions, including two accurate monthly closes in 2021. As BTC was close to its highs on these occasions, many treated the analyst and the model as gurus.

But the model started to go wrong at the end of last year, after BTC touched $70,000. PlanB’s predictions claimed that BTC would reach $100K by December, but it didn’t.

Afterwards, S2F estimates that the cryptocurrency will trade between $50k and $150k in 2022. In addition to being a very broad range, BTC today is worth less than 50% of the lower range. Therefore, many consider that the model overestimated its bullish predictions.

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