Key facts:
For Vitalik, it is irresponsible to predict prices as if it were a guarantee.
The stock-to-flow model has already had important variations in the past.
Vitalik Buterin, co-founder of Ethereum and one of the most recognized faces in the world of cryptocurrencies, dedicated a harsh criticism to the predictive models of the price of bitcoin (BTC). In particular, he referred to the model stock-to-flowwhich predicted a significant rise for this year and, to date, seems to be failing.
Via Twitter, Buterin assured that the «stock-to-flow It really doesn’t look good now”, on the drop in the price of bitcoin in recent weeks. This drop has moved the price of the cryptocurrency away from the levels that, according to the predictive model, should currently be around BTC.
Not only did he criticize the topicality of this model, but he also referred to this type of metric as something “harmful”. In his opinion, these predictive models give a false sense of certainty before the future that can be dangerous.
I know it’s impolite to gloat and all, but I think financial models that give people a false sense of certainty and predestination that the number will go up are harmful and deserve all the mockery they get.
Vitalik Buterin.
PlanB, the analyst who has promoted this predictive model and has had a lot of support in the community so far, responded to Buterin’s allegations. On the same social network, PlanB stated that “after a crash, some people look for scapegoats for their failed projects or wrong investment decisions”, referring to the countless problems that Ethereum has gone through regarding its updates.
Ether (ETH), cryptocurrency native to Ethereum, has also fallen significantly, trading just over $1,000 despite setting an all-time high above $4,000 a few months ago. Let us remember that, historically, the market has gone in the direction traced by bitcoin, so the predictive model, although it points to the increase of BTC, splashes the rest of the cryptocurrency market.
Although there are those who question these accusations in the midst of a bear market, Buterin has been critical of this valuation model in the past., which is based on the declining pace of monetary issuance in Bitcoin. That is, in the halving cycles (approximately every 4 years the number of bitcoins issued per block is reduced by half).
Model stock-to-flow in the history
Although most of those who have responded criticize Buterin, there are even analysts who agree with his vision. For example, Bob Loukas, who questioned PlanB ensuring that the way in which the predictive model has been presented is harmful, since it has been proposed as “a guarantee before a large and inexperienced audience.”
Vitalik Buterin starts from a fact: currently, there is a clear deviation of the price of bitcoin with respect to the model stock-to-flow. The deviation is also the largest downward in history. But it is not the first or the largest of all, if we consider a much larger one in 2014, and another in 2011. Only those were on the rise.
That is, as a predictive model, the stock-to-flow it is not entirely in uncharted territory at present. But, like any other metric used to test the market, it is not infallible or guaranteed that history will repeat itself in the future.
This same stick can be applied with any indicator, such as one that many analysts point to as key to the current market right now, as we have reported in CriptoNoticias. The 200-week moving average, which has historically represented good support, although right now BTC is below that level. Even the mark of the tops of each cycle had been a strong indicator, although it was broken this weekend with the momentary drop to $17,500.