Vitalik Buterin, the co-founder of Ethereum, doesn’t think much of quant analyst PlanB’s “stock-to-flow” model, which holds that Bitcoin’s price will shoot up to $288,000 by 2024.
The stock-to-flow model argues that the price of Bitcoin will rise post-halving because there’s a small supply shock to the market. With each Bitcoin halving the reward for mining new blocks halves. This, theoretically, cuts the supply of new Bitcoin in half—at least for a bit—as miners now have to work twice as hard to get their rewards.
What is the stock-to-flow model?
The stock-to-flow model was conjured up by an anonymous quant, PlanB, a little over a year ago; PlanB argues that Bitcoin is just like other commodities, such as gold or silver, whose value is tied to their scarcity.
Proponents of this theory note that the price of Bitcoin rose following previous halvings—after the 2016 halving, for instance, the price rose to highs of $20,000 at the end of 2017 (before crashing the month after).
Buterin disagrees. In a tweet yesterday evening, he argued: “the ‘halvings cause BTC price rises’ theory is unfalsifiable: Was the peak before the halving? Then it ‘rose in anticipation of the halving’ During? ‘Because of the halving’ After? ‘Because of…’ The last $20k peak was near the halfway point between the 2016 and 2020 halvings.”
Put simply, Buterin thinks that the theory is impossible to disprove, because analysts can attribute any price as evidence that the stock-to-flow model is correct. Thus, it’s not particularly helpful.
PlanB, the originator of the stock-to-flow theory, disputed Buterin’s dismissal of the theory, arguing that peaks are caused by “greed and fomo” and that the average price level is more important. “I beg to differ,” wrote the anonymous quant. “Halvings make BTC scarcer (in S2F terms) and scarce assets (BTC, gold, silver etc) seem to have a higher value than non scarce assets.”
At this juncture, June 15 2020, Bitcoin’s price hasn’t massively increased after the halving. But if it spikes at some point in the next four years, expect cries of “Told ya so!”
