S2F price Bitcoin model by plan B is just very unlikely
https://ift.tt/3mCqw3u
First off I’m a Bitcoin maximalist. I’m only discussing the Plan B model and holding my bags as I’m buying more. As a fellow Dutchman on unrelated matter, this guy gives so many red flags on his private account with crazy antivaxxer statements and delusional ideas about the healthcare system, but let’s leave it like that. I’m just questioning him and discussing his paper on a fundamental level.
The Stock-to-Flow ratio has already existed for decades, used as an indicator in commodities markets. It hasn’t worked so great for these assets so far.
As the name suggests, the Stock-to-Flow (SF) ratio simply is: Total stock dividend by flow, otherwise existing stockpiles divided by yearly production.
Bitcoin Supply
Circulating Supply 18,913,381 BTC
Max Supply 21,000,000 BTC
On average every 10 minutes on 6.25 Bitcoins are added. Discounting more efficient computing power effects compared to previous years. Let’s assume this is stable This means this year 328,500 is added.
Until the next halving then this FLAT number stays the same until the transition period where it decreases in the model. When you correlate the SF variance to the price, the correlation back to 2013 is about 0.009 (less than 0.5 is no correlation). The supply isn’t the only aspect relevant to price. This should have ended it, but no.
Also the SF model is a linear effect, with a few transitions during the halvenings, while the price has been historically logarithmic. You could transpose a factor to this using correlation factor between SF and price and this could be cherry picked by ease. This is exactly what our “friend” plan B did. S2F is [BS](https://ift.tt/3ctzhrA) from a statistical point of view and not a real model at all. So indeed you might as well just use a linear regression through price on a log chart with some tweaks, and you’ll get the same results. Just look at Benjamin Cowens upper regression band model. Apart from this. The S2F model doesn’t count on other competing cryptocurrency, as evidenced by the decrease in market cap, not even the most basic like the printing of money (M2 supply).
Imo this is not FUD just an observation. The SF is a linear data series and the Bitcoin price is built on a logarithmic scale. What could we expect from price you ask? Well, the problem is I think more complex, as you would have to check whether a log-linear fit is significantly better than a linear fit. Prices could be off by a 10x by a rough rule of thumb. Are we overvalued? Not saying that at all. I just think Benjamin Cowen has a more realistic fit to price and it’s totally uncorrelated with SF. Time to think longer term, so end of 23-24 we could hit triple digits.
Furthermore we have to average about 160k for 2 years from now on to average 100k according to S2F. Very unlikely. If the model breaks down to say average 80k we still have to hit an average of 115k from now on until 2024 (Or 60k [like this](https://ift.tt/3zbJLWH), I don’t know about that but this is more likely.
Bottom line. I’m just saying this to give people a chance to buy more, so they don’t fomo in with all their life savings. Just DCA IS THE WAY. Time is truly on our side.
Cryptocurrency
