According to Vitalik, it is not responsible to speak about prices as if they were a guarantee. The stock-to-flow model has already had significant fluctuations before.
Vitalik Buterin, the co-founder of Ethereum and one of the most famous personalities in the world of digital assets, directed a strong criticism of the predictive models of the price of bitcoin (BTC). In particular, he talked about the stock-to-flow structure, which predicted a solid increase for this year and which, to date, seems to be failing.
Through Twitter, Buterin explained that stock-to-flow does not look good regarding the fall in the price of bitcoin in recent weeks. This drop made the price of the cryptocurrency move away from the stages that, according to the predictive structure, should currently be around BTC.
Not only did he criticize the importance of this model, but he also described this metric as something harmful. These predictive models bring a false sense of certainty about the future and that it is an unsafe situation.
PlanB, an expert who has encouraged this predictive structure and has had a lot of support in the community, responded to Buterin’s opinions. On the same platform, PlanB explained that after a crash like this, some people seek scapegoats for broken projects or wrong investment decisions.
Ether (ETH), Ethereum’s native digital asset, also crumbled considerably, trading at just over $1,000 despite setting an all-time high reaching a peak above $4,000 a few months ago.
Historically, the market has followed the same direction traced by bitcoin. So the predictive model, even though it aims for an increase in BTC, would put the rest of the crypto market aside.
Although some criticize these accusations due to a rude market situation, Buterin has been critical of this valuation mode because it focuses on the declining pace of monetary issuance in Bitcoin.
Although many responded to Buterin, there are even analysts who agree with the criticism. Bob Loukas, who stood against PlanB, explained how the predictive model got presented as dangerous since it got launched as a guarantee before a vast audience with many newbies on their frontlines.
According to Vitalik Buterin, there is currently a deviation in the bitcoin price from the stock-to-flow model. This deviation is also the most prominent downward ever recorded, but it is not the first time since there was a much larger deviation in 2014 and another in 2011.
Stock-to-flow is not entirely in uncharted territory at present. But, like any other metric that serves to test the market, it is not infallible or guaranteed that history will repeat itself in the future.
This procedure can apply to any indicator, such as one that many experts highlight as key to the current market right now. The 200-week moving standard has historically represented good support, although right now BTC is below that level; even the mark of the tops of each cycle became solid guidance, although it got crushed this weekend with the momentary fall to $17,500.
By: Jenson Nuñez