Sunday, January 29

Bitcoin Stock-to-Flow (S2F) Is a Fallacy, Experts Say

In a recent publication in Bitcoin Magazine, the contributor known as Level39 raised questions about the Stock-to-Flow (S2F) model created by Plan B, stating that it is not useful because it is scientifically invalid.

Gathering other opinions on the subject, the main criticism is that the model contains redundancies that invalidate it. In short, Stock-to-Flow points out that “inventory is a function of stock” and, because of this, the data fits, but is useless.

Finally, the article also points out that Plan B, creator of S2F, does not accept criticism or questions about his model. Banning several followers, including some who changed their names to Plan C, after their model failed in December with the Bitcoin crash.

How to price Bitcoin?

Pricing Bitcoin is a difficult if not impossible task, and since its birth many have tried to create models for it. After all, whoever knows this answer is way ahead of everyone else.

In the first Bitcoin trades, people sold them at the cost of production, i.e. energy expended. However, the smartest ones quickly understood that a demand greater than the supply would make their price not be that.

As time passed, users started creating models that could indicate Bitcoin’s price range in the future. Perhaps the most famous of these is the Rainbow Chart, which uses a logarithmic scale.

Stock-to-Flow do Bitcoin é inútil

Back in 2019, an anonymous user identified as Plan B, presented a model called Stock-to-Flow (S2F), or Stock-to-Flow in literal translation.

The big difference between this and other previous models is that its creator claims that the S2F is a scientific model, while the others are just guesses, in the words of their own creators. However, Level39 points out that this is a fallacy and recommends turning the page.

“Bitcoiners who claim to fight the sale of snake oil and shitcoins should be more demanding.”

Using analysis from other critics, Level39 points out that Plan B is claiming that “stock is a function of stock”, i.e. the same as saying “a banana is a type of banana”, so the data fits. That is, it cannot be considered as a scientific model.

In addition, Level39 highlights that Plan B never factored demand into its calculations. Furthermore, it also notes that the creator of S2F changes numbers arbitrarily, citing a tweet by Plan B in which he changes parameters after the Bitcoin price soars, stating that his “first model was too conservative”.

Plan B, creator of S2F does not accept criticism

Probably being the most commented model nowadays, it is natural that people are interested in understanding how it is made, as well as criticizing it.

However, Plan B doesn’t seem too happy about it, blocking followers who contest their models — in the plural — after all, in addition to Stock-to-Flow (S2F), there’s also Floor Model and Stock-to-Flow Cross Asset (S2FX) ).

Finally, the big criticism is that Stock-to-Flow is treated as a scientific model by its creator, which it is not. Also because of the lack of dialogue, many are abandoning both S2F and Plan B.