Stock-to-Flow Model: Modeling Bitcoin's Value with Scarcity

[JayJuanGee]

disgruntledness

Not at all. I'm worried by the damage the model could do to Bitcoin (more below).

I guess I will read more details about your ideas regarding how the S2F model damages bitcoin below, yet I am having trouble appreciating how a model could really cause damage in any kind of substantial and meaningful damage... unless you are suggesting that it is so convincing that people are going to place more weight upon such projections within such model than it deserves.. and even that.. it is not like the substantive terms of such model is lying to the people... the model is somewhat passive in that sense in terms of presenting guidelines for what could happen.. if people are such idiots as to read too much into such a presentation information.. I don't see how the model would be causing their dumbness and gullibilities... .. I mean a model could use misleading facts or misleading logic, no?..  but we do not have that going on here.. so your overall presentation of the model as damaging seems to misplace how a model should be considered amongst other information for individuals to come to their own determinations, including how much weight to give to such a model.. including that some folks will overweigh the predictability aspects and other people will underweigh the predictive aspects of such model.

It comes off as somewhat patronizing to suggest that the model is flawed because it is too convincing, if that's what you are suggesting.. but hey.. I will read more about your details in regards to the supposed damage to the extent that you might flesh this out a bit more below or to the extent that you might be saying something other than what you have already said.

That's bullshit d5000.  The fact that stock to flow to a bunch of shitcoins means that it is not valid when applied to bitcoin.

I agree with you that several altcoins are completely different assets than Bitcoin, because of their centralized and sometimes scammy nature. But that doesn't apply to all of them. There are more than hundred altcoins which technically are similar to Bitcoin (no premine, no centralized group in charge etc.).

I still think that you need to be careful with those kinds of granular comparisons of unequal assets that likely do not matter very much in the end.

Yeah.. I don't like when people proclaim that bitcoin is only in the lead because it was first, but there is something to being first in terms of considering how various networking effects evolve, and when we are dealing with something such as money or storage of value, there is likely a bit of natural gravitation towards one standard.. especially if the standard has superior qualities in terms of Gresham's law considerations.

In other words, you may potentially have already heard about the idea that if you want to replace an incumbent you better be something like 10x better than the incumbent, otherwise you do not have any kind of meaningful chance.. beyond potentially temporarily (perhaps 50 years or more?) deceiving others into believing that you have some kind of a chance... in other words, value is going to continue to gravitate into the incumbent, absent if you are able to achieve something like a 10x or more improvement upon the incumbent so that it becomes worthwhile to strive to replace the incumbent rather than the more logical route of improving upon the incumbent.. to the extent that the incumbent might have some capacities to improve.

you are getting into comparing various similar coins, and let's even give the benefit of the doubt that some of them might be several times better than bitcoin, but it still ends up being a BIG SO FUCKING WHAT because they are not even close to 10x better than bitcoin.

I understand that you might be tempted to engage in such comparison because you will proclaim that NOT very much time has passed, and it has ONLY been 13 years, so how could bitcoin gain such an incumbency status? and seems to me that you are failing and refusing to account for the fact that Bitcoin is not just Bitcoin, but there is a lot of building that is going on around bitcoin and there are not really any major flaws in bitcoin, so ancillary actors continue to build upon bitcoin rather than taking chances with some other thing that happens to NOT be 10x better.. they are not going to take chances on such products that are not clearly superior to bitcoin.. even though those various shitcoins get all kinds of hype, they do not convince smart money/people to defect over to them... the smart money and smart people remain in bitcoin...

It is like the analogy that Trace Mayer used to use about the professional football team compared with the junior varsity.. the junior varsity does not have a chance.. they will get crushed.. and continue to get crushed even if they engage in all kinds of marketing.. there is not enough there there in order to actually allow them to compete in any kind of substantive and meaningful way.

Even with a superificial view at their price evolution it becomes clear rapidly that they are far away from the predictions by the stock-to-flow-model. Take Litecoin or Monero as examples, which both reached a new ATH in 2021, but their price level is similar to four years ago. Both have no excessive inflation rate so the curve should look similar to Bitcoin's.

Why are we wasting our time with such nonsense comparisons?  There is no reason to believe that Litecoin or Monero should look similar.. the dynamics are different if you are not the leader of the sector...

Bitcoin is the leader of the sector the last I checked.. and there is nothing even close to it.

If stock-to-flow is only valid for Bitcoin, gold and some other metals, but can't be applied to other assets of similar nature, what makes the "match" of their stock-to-flow curve in some timeframes more than a coincidence? A theory should be valid for all assets of a given category.

Over my pay grade as voluntary pundit to study into this.... even though it seems to me that you are going on a tangent and getting into the weeds of questions that do not really get to helping anyone with how much weight that they might want to place upon stock to flow as it is applied to bitcoin.. I have asserted that it is amongst the best of our current models so long as coupled with four year fractal and exponential s-curve adoption based on network effects and Metcalfe principles... so I consider stock to flow to be ONLY part of the consideration - even while it seems that it is the best of the frameworks that we have going.. even if we might have to shift the expectations down on their curve a wee bit..

The only valid argument would be that many altcoins don't have really a "mature" market, but just for LTC and XMR this isn't the case. They are actively traded at hundreds of marketplaces. So their price evolution should be valid to contrast the stock-to-flow hypothesis with.

I think that the answer is that they are not the industry leader, so their lunch is going to get eaten by bitcoin.. but that is kind of a mere speculation on my behalf... and I still doubt that there is any reason to get worked up regarding stock to flow not working with them.. but hey.. you do you.

The lack of accounting for demand hardly seems to be as big of a flaw as you are making it out to be, and I suppose that one of the reasons that I have liked to emphasize that stock to flow should be looked at along side the four-year fractal (which surely is somewhat redundant) and also considering exponential s-curve adoption based on network effects and metcalfe principles - is probably my concern (as well) that demand is not sufficiently accounted for in the stock to flow model.. and considering the varying network effects (even the 7 that were outlined by Trace Mayer) would be helpful supplements to the stock to flow model.

In my opinion, network effect is probably the main driver of Bitcoin's price appreciation. Thus, I think a detailed analysis of this phenomenon, when applied specifically to Bitcoin, would give more insight than any purely supply-based model like stock-to-flow.

Seems to me that stock to flow helps to ground the theories about networking effects within a parameter that is tailorized to bitcoin.. otherwise you just arrive at amorphous nothingness of pure vague "number goes up" theories without any meat on the bones... stock to flow puts some meat on the bones and provides a kind of framework to consider number goes up ideas.. yeah, it might not be right in its magnitude predictions.. but it gives you some ballpark ideas that are better than merely looking at the vague concepts of 7 different network effects....

In other words, we have to account for BTC's scarcity and how that concretely pushes bitcoin waves (mania periods?).. and S2F seems a good tool for considering that angle of bitcoin.

I would even argue that we can leave supply entirely out as 90% of all Bitcoins were already mined. The effect of halvings on supply inflation is lower in every iteration.

I can see that on a theoretical level, you can consider bitcoin in that direction, but still is not going to get you out of actual bitcoin price dynamics that have a supply curve that has a pretty strong framing effect on bitcoin - even if you strive to ignore it... and come up with other theories that seem to be generally applicable and not really tethered to bitcoins actual dynamics.

By the way, I have always been a bit bothered by the idea that mining causes the bitcoin's to come into existence because they get issued.. but we already know that they are already there.. so for sure, there are ways to calculate that they are already there.. and even get into efficient market hypothesis frameworks to attempt to price in the halvenings and the concrete physical dynamics that even though we know for sure that various coins are going to be issued at specific times, there still seems to exist actual physical and material effects that are not exactly knowable before the halvenings occur, and the actual various behaviors of folks trying to get coins that have been reduced in their issuance quantity that can take several months (or even a year or so) to play out to see how the halvening of the new issuance has caused increased constraints on the coins available and actors within the space adjust their behaviors to figure out the extent that they want coins from the existing supply, the new supply and in the end it might not really matter so much from where the coins are coming, but all the persons involved in the space come to realize that the price is going up because the new issuance is not enough to keep up even considering the existing supply that can get thrown back on the market too (with increases in prices).  Ignore, denigrate and poo poo these supply constraints to your peril...

Supply constraints have been an ongoing dynamic in bitcoinlandia, continue to be an ongoing dynamic and will likely continue to be an ongoing dynamic that continues to push bitcoin into cycles rather than merely vague and amorphous "roll your own" detached NGU baloney.

harmed the bitcoin community... that seems to be bullshit too.

yeah... there may have been people who were overly assigning value to BTC prices to be at least above $98k in November and above $135k in December.. so they got reckt as fuck because they were gambling..

More as about these short-term gamblers I'm worried about two things:

1) longer-term price evolution - stock to flow promises

First of all.. S2F does not promise shit.. you are reading into it, if you believe it to be promising something..  but it does provide some probability frameworks in which you are likely to consider that some scenarios end up being more probable than others, so if you read those as promises, you are failing/refusing to appreciate that (especially in the short-term) minority scenarios can both play out and play out way longer than anyone believes to be reasonable or possible... so surely there are folks who are ready, willing and able to engage in behaviors to cause minority scenarios to play out, and they can do it for a very long time (relatively speaking), but does not mean that they will be successful in terms of breaking the reversion to the mean (even if they are trying to accomplish such.. and even though they might cause the model to have to become tweaked - such as shifting down the curve).

basically a continuation of the steep price increase of the last years. Even if in 2022 or 2023 we see again a strong bull market which gets the price again "in line" with the model, the expectations for 2025 (next post-halving) already are extremely high (500-750K). While it's not completely impossible I doubt this price will be reached in this decade. So roughly in 3-4 years likely there will be many disappointed investors.

The predicted numbers do not seem unreasonable to me, so long as you do not either consider them as guaranteed and also continue to prepare yourself for both UP and DOWN... including appreciating that the asymmetric bet nature of bitcoin includes the idea that you do not need to stock away a whole hell of a lot of value to prepare for UP.. in order to take advantage of UP.. in case it happens - even if you consider such UP as a minority scenario.

I have seen this over and over in bitcoin, in which people fail refuse to adequately prepare for UP.... and surely having a lot of doubts about UP might justify taking a smaller position in regards to UP, but it does not justify NOT preparing for UP or being overly whimpy in terms of your UP preparations or fucking around with trading and trying to time the market and all that kind of bullshit.

On a personal level, newbies should just be figuring out what level of exposure that they want to get, invest for the longer term such as 4-10 years or longer and figure out how much to allocate to bitcoin.. These days investing 1% to 25% of your quasi-investment portfolio into bitcoin would be reasonable for any newbie, and to continue to study the space while getting to your initial investment allocation....

When I got started in bitcoin in late 2013, it took me about a year to get to my own investment allocation - which was 10% (even though I did not know that was going to be my target when I started), and my second year in bitcoin, I largely ended up overallocating into bitcoin and getting up to about 13.5%-ish... Seems to me that these days bitcoin's investment thesis is stronger, and instead of having 1-10% as the recommended initial newbie target, it is more than reasaonble to recommend such a 1% to 25% range, and surely the person is both responsible for choosing their own allocation and also responsible to attempt to learn and adjust strategies along the way... including one of the most basic things that any newbie should do is to assess his/her own particular circumstances including but not limited to cashflow, other investments, view of bitcoin as compared to other possible investments, timeline, risk tolerance and time, skills and abilities to learn, strategize and tweak along the way which may well include reallocating from time to time, trading and the use of financial instruments such as debt and other financial instruments such as margin and options... and surely I don't recommend getting to the more advanced stuff until working out the basics and sticking with more basic plans to make sure to have a solid set of strategies in the basics before using more advanced tools.. and for sure accumulation of BTC basics include dollar cost averaging,  buying on dips and lump sum investing... which I consider DCA to be the most powerful starter technique while attempting to figure out what else to do.. but getting started and getting the fuck off of zero..,. or these other failure/refusal to prepare for up scenarios that you seem to be cautioning d5000.  

2) the focus on the supply side/scarcity as "reason to invest in Bitcoin" gives credit to those critics who view Bitcoin as a "ponzi" or "greater fool game" where everything depends on finding new buyers for an asset whose main virtue is "scarcity". Bitcoin's scarcity is definitively one of the main reasons why it works. But it should never be the only or main reason to invest in it.

Well.. maybe as a newbie bitcoin investor, many folks might not understand the differences between legitimate investments, so I would not expect them to figure it out right away.. and to be fooled into the wrong frameworks, so likely any newbie should be attempting to spend some time to study about bitcoin and also to study about their own finances.. and maybe that is part of the rationale why starting with DCA is amongst the smartest ways to get started in bitcoin.. and also to attempt to study along the way.  For sure, also once a person takes some steps to set up DCA and even to get some kind of a meaningful/substantial stake in bitcoin, then they are going to be in a position that some of the aspects of bitcoin will become more clear to them with the passage of time.. and yeah, if a person is very skeptical about bitcoin, maybe s/he is going to start out with putting just $10 per week into bitcoin, but as they become more familiar they may well be able to achieve something more aggressive, such as $100 per week.. and for sure, any person getting started in bitcoin should be taking steps to assess his/her own situation and to tailor his/her own bitcoin investment to such personal considerations and to reassess along the way.. which surely also might include getting out of bitcoin in the event that there are conclusions that bitcoin is not serving them in ways that they initially thought to be possible... so surely part of the justification of investing small amounts (such as $10 per week) while learning is that none of us should be over-investing into something in which we are not comfortable both financially and psychologically... and for sure, if any of us establishes at least a 4-10 year investment timeline, then we should not be expecting to cash out of any of our bitcoin during that time, so we also have to make sure that we have our cashflow situation under control so that we are not going to need any of the money that we put into bitcoin during that investment timeline.. and surely it is not easy for anyone to get their shit together and to get their finances in order while beginning an investment in bitcoin, another reason to start out small and to maintain something that you know that you can stick with.. while assessing and reassessing and maybe after a few years of being in bitcoin, there will be greater levels of learning that allow such a person to justify becoming more aggressive in his/her bitcoin investing.. perhaps? perhaps?

A combination of both factors could led to a worst-case scenario for Bitcoin: Disappointed investors change massively to the "ponzi critics" group. They get louder and louder in the media, Bitcoin's price plunges, and a general public opinion consent is forming that Bitcoin really is dubious and based on ponzi-like characteristics. Sharp regulation in many countries is likely to follow. While this will probably not mean the "death" of Bitcoin, it would be a major setback, back to 2015 or so.

Seems like a BIG SO WHAT? to me.  People have to take responsibility for themselves, and whatever the market is going to do whatever it is going to do... and hopefully, you are not getting so worked up about such nonsense that you are failing/refusing to prepare your own self in terms of your bitcoin.. and again, frequently there is a considerable pattern of people getting worked up about various nonsense which causes them to inadequately prepare for UP.. so you do what you want if you are getting wrapped up into such nonsense and believe that bitcoin's price dynamics are going to be influenced in the ways that you believe and go in the direction that you believe to be potential .. while ignoring the S2F model elephant in the room - and other more relevant theories including four year fractal and exponential s-curve adoption based on Metcalfe principles and network effects.

To clarify: I am not endorsing the "ponzi" criticism at all. I'm convinced of Bitcoin's genuine strengths (difficult to censor, decentralized, global, etc.). However, I would like the focus for investors to change to demand-side characteristics: use by merchants/consumers, Lightning Network growth, and so on, as the reasons to invest in Bitcoin.

Seems to me that you are lacking quite a bit in your framework of what is bitcoin and how bitcoin is an actual paradigm shifting technology that has been purposefully designed with incentives of supply constraints that make it the soundest money ever made - and which is very powerful in our internet/digital age, and you are failing/refusing to really account for the supply angle that has been influencing bitcoin's price dynamics and likely to continue to influence bitcoin's price dynamics, but hey you can do what you want in terms of the frameworks that you would like to believe and what ways you wish to propagate your ideas about bitcoin's dynamics that seem out of touch with reality to me.... and I am not asserting that your framework is irrelevant, just like the shadows in the cave are not irrelevant.. but they are not as directly relevant to appreciating the actual thing that we have in front of us - aka bitcoin.

Because if we can prove that Bitcoin doesn't depend on a price increase but is really used massively, then this would lead eventually to the definitive rebuttal of the "ponzi criticism", which would be a major achievement for Bitcoin in public opinion, I think.

We don't need to do shit.

Bitcoin speaks for itself, and if people want to get distracted by nonsense.. let them remain distracted... for sure some of these periods of suppression of bitcoin prices allows for more accumulation of BTC at lower prices, so hopefully, you are focusing on yourself rather than trying to save dumb-fucks from focusing on the wrong frameworks. By the way, I am no kind of elitist who is out of touch from reality, but to some extent, you gotta let people figure these things out for themselves, and I doubt that it is helpful to proclaim that S2F is not helpful to understand bitcoin so long as it is coupled by other dominant frameworks of four-year fractal and exponential s-curve adoption based on Metcalfe principles and network effects.  Yeah, there are other things going on, including manipulation and various other factors/indicators that you list, but it seems to me that you are getting overly distracted when you are trying to fight with what is actually going on, including better understanding how S2F fits into this matter, even if you seem inclined to give it less weight than me... but it seems to me that if you are spending so much time fighting it you are likely providing a disservice to yourself and to others, even if you genuinely believe that you have better ways of framing the matter.. and yeah maybe you can argue your nonsense for 4-10 years into the future, when you should have been focusing on ways to at least incorporate S2F into your framework.. but again, do what you like... that's your choice, and there are a lot of folks who are all worked up in their negging on S2F..and if you want to get caught up in such premature delusion.. then that's your choice.

Stock to flow remains one of the best BTC price models that currently exist in bitcoin (if not the best?). even if it is currently 2 standard deviations below the means of expectations.

Let's talk again in 2025

We do not have to wait that long.   I think that people better make sure that they are thinking about bitcoin and acting now, rather than propounding some kinds of nonsense amorphous frameworks that they believe to be better blah blah blah.

Hopefully, you are acting based on information that you have in front of you right now in terms of adequately allocating into bitcoin, and preparing for a variety of scenarios rather than wanting to be right in 3-4 years.. about something that has a variety of paths and none of us should be fucking around with just one framework.. or whatever it is that you are trying to proclaim yourself to be correct about.

Are you wanting to give close to zero weight to S2F?  (maybe 20% or less weight to S2F?)  is that what you are trying to achieve?  After all of this back and forth with you, I still don't know what grounds you in your supposed "better way of thinking" about bitcoin price dynamics/social dynamics.  Are you really saying anything except that you wish that S2F were to have less weight than it does in the minds of folks considering BTC price dynamics. You might even be misappropriating how much weight that you believe others are giving to S2F in order to make your arguments regarding S2F being dead or insufficient in a variety of regards...  blah blah blah.

By the way, even fillippone mentioned above that the stock to flow expectation  for Bitcoin's mean price for the whole of the 4-year period following the halvening is $100k.. so we are a couple of months short of the half way point, and some folks want to completely write off the model?    Shouldn't we get further along in the whole assessment period before arguing both the model has little to no value and that the model is invalid.... blah blah blah.

I've wrote several times in this forum, already months (even years, I think) ago, that I disapprove of the stock-to-flow model, even when it still seemed perfectly valid.

Ok... so you want to say that you hated S2F before it was even fashionable to do so.. great.

I admit that was mostly in the local sections, because I'm not so fluent in English than in Spanish and German and thus are more active in these sections. Many people disagreed with me and that's completely ok.

They probably disagreed with you because you were likely trying to give S2F way less weight than it deserves... Maybe you are trying to suggest that S2F should be less than 10%, but others are in the 40% to 50% or even more arena, but you are also trying to attribute arguments to them that they are in the 80% to 100%, which is also not true.

I would suggest that you reassess some aspects of your wanting to be right rather than trying to be a bit more reasonable in terms of what you might be saying regarding how much weight you are suggesting to be given to S2F... Maybe if you consider that question, you might, at least, find some value in S2F in order to attempt to make some of your arguments more reasonable and more fact based..?  I don't really have too many issues with a lot of what you are saying, except that you seem so damned inclined to negate and denigrate S2F that you seem to be skewing your own presentation of various matters... Maybe I am wrong, but seems that you should be able to frame your arguments better.... but I am also considering if you really do attempt to more fairly frame your arguments, you will likely realize that some of the ways that you are already presenting the matter are not as strong as you are trying to make them out to be merely because you are seeming to want to be right rather than to really think through some of the matters in more reasonable ways.

But it's not that I got "only now" against this model "because it no longer works".

Seems premature to me to be saying that the model is wrong.  Think about it.  The model suggests a $100k average BTC price for the whole of the halvening period, and we are slightly less than half way through the halvening period.  Yeah sure, maybe you could say that the model is too ambitious and maybe only $60k or $80k will come to average out for this particular halvening period?  We also had PlanB spouting out absolutes and floor models, which are different concepts, even though he was basing some of his assertions on his interpretation of the S2F model.. which that portion of his interpretation was shown to be wrong, especially how he framed it.. namely $98k by November and $135k by December....

I think if a model was wrongly conceived from the start, then it should not be used, even if it seems to work for some time. Just there's where the danger lies: we could get confident that it works, but when we most need it (e.g. in the next bear market, when for Bitcoin it would be advantageous to find new investors) it fails completely. See above in the "harm" section.

I don't believe it has failed.  If you have an expected line, the spot price can deviate greatly from expected mean line... under it or over it.. so yeah, currently we are quite greatly under it.. but still.. seems like a BIG SO WHAT?  and likely too soon to be saying that the model is not helpful.... or that it is invalidated or broken or whatever it is that you are saying.

Surely, it may well end up being the case that we get through the whole four-year period, and the stock to flow model (in its current iteration) underperforms the whole four-year period, [...] might well help to inform those of us who are taking such model somewhat seriously as a serious contender in the way we think about BTC price dynamics whether the model might be invalid or whether the model might need some kinds of tweakenings, no?

It should not be tweaked infinitely, though.

I don't see why not.

For some time one can adjust magic constants a bit and add new formula elements to make it work again. But until demand isn't taken into account, its main flaw continues to be present. Did PlanB try to get a peer-review by a serious economist?

Your level of expectations for the model seems to rise to the level of ludicrous... A lot of people have commented on the model at various points in time.. so if you choose to completely discount it or completely worship it, that's on you... .  It's still amongst the best of the models...from my perspective.. even if it is currently quite a bit underperforming prior expectations.

By the way, even if we disagree in most aspects (with the rest of your post, I partially can agree, or at least agree to disagree), thanks for taking the time to answer in detail

Of course, we do not disagree about everything.. that's for sure.

[1715104310]

1715104310

[d5000]

I'll limit my answer to the main topics:


1) Using altcoins to check S2F validity: OK, so you're suggesting that Stock-to-Flow only is valid for "industry leaders" (i.e. Bitcoin in the crypto space). In my opinion, this makes the model very specific; you wrote it's "tailored for Bitcoin". We lose then an opportunity to be able to contrast data with more sources to improve the model. (I will not discuss about maximalism/non-maximalism here, because that's a bit off topic.)


2) S2F and "network effect": If I am not wrong, the current S2F formula is the following:

exp(−1,84) * (current supply/block rewards in the last year)

This means that the indicator does only take supply into account, and adds a "magical constant", to make it fit with the price curve.

If we assume that the price of every asset in the world is driven by the relation between supply and demand, this would mean that S2F is basically assuming that we have a constant demand, because the price is completely explained by the supply variation. But I heavily doubt that we have constant demand in Bitcoin. In bear markets, trading volume typically drops, transaction volume often too, and the sinking price itself is obviously also an indicator of shrinking demand. These variations are not part of S2F.

So what S2F is basically assuming is that "Bitcoin's cycles are only explained by supply variations". I think this is wrong, as you can imagine

But if I considered S2F at least a little bit useful as a single indicator of a bigger model - and I would not categorically rule that out! - then I would add a demand indicator to it. A simple "adoption curve" like the S-curve you mention, in my opinion, would be too simple. It doesn't take into account a whole lot of factors which could favour (or not) faster adoption in certain regions and/or worldwide, e.g. regulation, evolution of public opinion, trends, but also technical achievements which lead to new use cases (example: Lightning Network) etc.

The problem is of course that demand is difficult to quantify; but one could build on models like the user estimation which is published regularly by crypto.com (an estimation based on exchange user accounts) and combine it with, for example, the Lightning Network growth and transaction volume.


3) The "harm of the model" discussion: You are of course right that people need to learn themselves and take responsibility for their investment decisions. But how can they learn to take better decisions? Reading different sources and opinions. So to take a decision if taking S2F into account or not, they should read PlanBs arguments and those of his critics. PlanB is pretty bold about his model, it seems, so his critics also have to be bold to be heard, and sometimes a bit harsh.

I don't want to repeat what I wrote before but I think if too many people are drawn, by an uncritical endorsement of S2F by too many people and institutions, into wrong decisions, this won't end well.

What I question regarding to "S2F communication" isn't the fan club it has in this forum and among Bitcoin users in general. This is totally legitimate (as are my criticisms, also as a humble simple forum user). But when I see S2F endorsed by Binance's "academy" (lol) then I become skeptic (a "permabull" model would fit well with their growth expectations - again, fodder for the "bitcoin is a ponzi" guys).


4) S2F weight: The problem is that the price predictions which are so popular as colourful chart pics (by PlanB or their followers) really attribute 100% of the long-term price movement to S2F. Or where are other factors displayed in these charts? As I've mentioned above I don't discard S2F entirely as a factor, but I would give it a weight of less than, let's say, 30%. You may say that it describes hype cycles adequately, but there is at least one exception: the first one, in 2011, unrelated to all halvings. Only explainable by other factors related to demand.


5) "Tweaking" a wrong model infinitely: That's what some scientists tried in the 15/16th century to continue to sustain the geocentric model. You can do that for some time, that's reasonable, but if you exaggerate and a contender offers a better explanation based on completely different assumptions, you risk being looked at in the future as at the "wrong side of history".  (I have to clarify that I don't know currently a complete "contender", but that may change ...)

6) Importance of supply restriction making Bitcoin "sound money" - here we've simply different opinions. IMO the particular kind of supply restriction Bitcoin employs is not it's main feature, but I don't question people who think so.

By the way: My criticism is basically in line with what Daniele Bernardi wrote here in January (discovered the article just now, I may check the "quantitative model" he's proposing alternatively).

Just one little quote at the end:

Ok... so you want to say that you hated S2F before it was even fashionable to do so.. great.

lol, no. Read again why I wrote that, if you want (it's a reaction on what you wrote in the paragraph I quoted.)

[JayJuanGee]

I'll limit my answer to the main topics:


1) Using altcoins to check S2F validity: OK, so you're suggesting that Stock-to-Flow only is valid for "industry leaders" (i.e. Bitcoin in the crypto space). In my opinion, this makes the model very specific; you wrote it's "tailored for Bitcoin". We lose then an opportunity to be able to contrast data with more sources to improve the model. (I will not discuss about maximalism/non-maximalism here, because that's a bit off topic.)

I am not sure what factors need to exist or not in order to allow stock to flow to apply to various shitcoins, so seems like a big waste of time to be going down such comparison road blindly and trying to use S2F with shitcoins... because I know that bitcoin is distinguishable from shitcoins, but I rarely debate about such nonsense in terms of comparison contrast because it just seems to lead to muddy thinking and also my point about any shitcoin likely needing to have something like 10x improvement over bitcoin in order to really be a possible contender.. and none of them seem even close in that arena.. so just seems a big wast of time to be either talking about various shitcoins or attempting to apply S2F to them... but do what you like... if that floats your boat.

2) S2F and "network effect": If I am not wrong, the current S2F formula is the following:

exp(−1,84) * (current supply/block rewards in the last year)

This means that the indicator does only take supply into account, and adds a "magical constant", to make it fit with the price curve.

If we assume that the price of every asset in the world is driven by the relation between supply and demand, this would mean that S2F is basically assuming that we have a constant demand, because the price is completely explained by the supply variation. But I heavily doubt that we have constant demand in Bitcoin. In bear markets, trading volume typically drops, transaction volume often too, and the sinking price itself is obviously also an indicator of shrinking demand. These variations are not part of S2F.

Well if you have a price curve that seems to explain a vast majority of what is going on by focusing on supply and keeping demand as a constant, then why get caught up in trying to figure out if demand might have a better constant calculation.. sure with the passage of time, there might be some need to adjust the demand curve because like  you suggested the constant might work in years 1-12 but might not work so well in years 13 -20 or some other period.. so that might be part of something that might need to be tweaked at some point if it is appearing to not capture the rest of what is happening in the model... do even you are admitting that demand is included.. but you wished that it were NOT assumed to be a constant... or the formula for the constant needs to be tweaked somehow.. no problem.. tweak away.. especially if there ends up being a problem in this halvening period (which again seems to be too early to presume a problem for this halvening period, even though currently the spot price remains right around 2 standard deviations below expected price.

So what S2F is basically assuming is that "Bitcoin's cycles are only explained by supply variations". I think this is wrong, as you can imagine

Not only do I imagine, you have said it a few times, already.

But if I considered S2F at least a little bit useful as a single indicator of a bigger model - and I would not categorically rule that out! - then I would add a demand indicator to it. A simple "adoption curve" like the S-curve you mention, in my opinion, would be too simple. It doesn't take into account a whole lot of factors which could favour (or not) faster adoption in certain regions and/or worldwide, e.g. regulation, evolution of public opinion, trends, but also technical achievements which lead to new use cases (example: Lightning Network) etc.

You might get caught up in too many weeds by attempting that when a constant seems to be sufficiently enough to project forward...

The problem is of course that demand is difficult to quantify; but one could build on models like the user estimation which is published regularly by crypto.com (an estimation based on exchange user accounts) and combine it with, for example, the Lightning Network growth and transaction volume.

well, yeah.. if you had ways to simplify the demand curve without getting too caught up into weeds.. that might be helpful.

how about using a constant?  hahahahhaaha

3) The "harm of the model" discussion: You are of course right that people need to learn themselves and take responsibility for their investment decisions. But how can they learn to take better decisions? Reading different sources and opinions. So to take a decision if taking S2F into account or not, they should read PlanBs arguments and those of his critics. PlanB is pretty bold about his model, it seems, so his critics also have to be bold to be heard, and sometimes a bit harsh.

It takes a while for any newbie to learn about the bitcoin space, and of course, each of us has to do what we can do.. and in the beginning it is likely more difficult to sort between good and bad information, but after we have studied the space for more than 100 hours, we start to become more confident and after 1,000 hours even more confident.

I don't want to repeat what I wrote before but I think if too many people are drawn, by an uncritical endorsement of S2F by too many people and institutions, into wrong decisions, this won't end well.

Yes.. you have said this, and in markets there are always going to be winners and losers..and I find no reason to change my opinion regarding DCA accumulating into bitcoin is a good idea.. while starting out relatively modestly, building up your accumulation and studying along the way... what else can you do?  except maybe avoid gambling, and you are largely suggesting that a lot of folks are prone to gamble, and sure that is true.. and they get reckt.. but how can you really stop them from gambling unless maybe suggesting another strategy that they might be willing to follow such as DCA accumulating that might cause them to be less inclined towards gambling strategies?

What I question regarding to "S2F communication" isn't the fan club it has in this forum and among Bitcoin users in general. This is totally legitimate (as are my criticisms, also as a humble simple forum user). But when I see S2F endorsed by Binance's "academy" (lol) then I become skeptic (a "permabull" model would fit well with their growth expectations - again, fodder for the "bitcoin is a ponzi" guys).

Sure..some people get caught up in various information sources that might not be very objective, but each person has to decide for himself/herself regarding how to structure their learning.. and maybe while they start to invest in bitcoin whether that is $10 per week, $100 per week or some other amount while they are studying the space, figuring out their own situation and attempting to apply their bitcoin allocation to their own circumstances with with various individually tailored criteria/preparation areas that I have already mentioned.

4) S2F weight: The problem is that the price predictions which are so popular as colourful chart pics (by PlanB or their followers) really attribute 100% of the long-term price movement to S2F. Or where are other factors displayed in these charts? As I've mentioned above I don't discard S2F entirely as a factor, but I would give it a weight of less than, let's say, 30%. You may say that it describes hype cycles adequately, but there is at least one exception: the first one, in 2011, unrelated to all halvings. Only explainable by other factors related to demand.

I don't know.. of course we can look at something for its fit with historical patterns to explain what has happened, and then it's projection forward.  So of course the BIGGER question is how much to use such model for projecting forward so maybe it is directionally correct, but not correct in regards to specifics, but even so if you are trying to project forward, then you can attempt to figure out what you are going to do in terms of whether you buy now or you wait... and really there are strategies that you can create for yourself that attempt to prepare you for a variety of directions that bitcoin could take, and if you end up being directionally correct, then does it really matter if you used the right model or not? ..

As I already mentioned, it seems to me that bitcoin is such an asymmetric bet to the upside that it would be foolish to not be making preparations, and in some sense it is a big so what if you place 10%, 30%, 50, 70% or some other number on S2F's predictive value because in the whole scheme of things maybe some of your views might influence you whether you start out investing $10 per week or $100 per week or some other amount, and surely if you are finding way more bullish models that are motivating you, then you may well gravitate towards more aggressive approaches, but still you should be limited within the prudence of your own finances and tempered by ongoing striving to learn along the way, too.

5) "Tweaking" a wrong model infinitely: That's what some scientists tried in the 15/16th century to continue to sustain the geocentric model. You can do that for some time, that's reasonable, but if you exaggerate and a contender offers a better explanation based on completely different assumptions, you risk being looked at in the future as at the "wrong side of history".  (I have to clarify that I don't know currently a complete "contender", but that may change ...)

I doubt that letting the perfect be the enemy of the good, is a great approach.. so yeah, each of us has to take responsibility for our own adoption of a model that might end up being wrong or the model is getting tweaked too much that it was never correct. 

Ultimately I agree with you that no model should just be blindly followed merely because it sounds like what you want to hear.

6) Importance of supply restriction making Bitcoin "sound money" - here we've simply different opinions. IMO the particular kind of supply restriction Bitcoin employs is not it's main feature, but I don't question people who think so.

For me, there seems to be some value in bitcoin's incentivizing hashpower from all over the world.  In my 8+ years in bitcoin, I have continued to be fascinated by the whole thing, and I am so surprised that 8 years later, bitcoin has played out quite more bullishly than even my most bullish of scenarios.. but continuing to study and to continue to find facination.. including that bitcoin is about 1,000x better than gold but only less than 1/10 the price.. so that level of bitcoin's value will likely continue to contribute to bitcoin's ongoing appreciating price.. to meet and exceed gold's value in this cycle or the next cycle, and then 10x to 100x will be easier to achieve, than 1,000x  in terms of bitcoin's price.. so for sure, it could take a while for all of this to play out.. even though people keep working on various aspects, network effects keep building and the various BTC price prediction price models help to give us more nuance than merely being directionally correct, but sometimes they can get us in the ballpark of magnitude correctness too.. even if they cannot necessarily get the timeline right with any kind of precision... but maybe in the ballpark, from time to time...including stock to flow.. getting us in the ballpark of the right kind of thinking about this asset class (aka bitcoin)..

By the way: My criticism is basically in line with what Daniele Bernardi wrote here in January (discovered the article just now, I may check the "quantitative model" he's proposing alternatively).

Any of us can come up with all kinds of numbers.. and I consider the whole potential addressable market to be a bit more than $1 Quadrillion... so bitcoin is likely to absorb all of that at some point.. and it does not even matter if I am correct with any kind of accuracy, because directionally, it seems to be correct and stock to flow also helps us to see how to get there....even if there might be various ways that S2F gets the timeline wrong..,. and surely, if it takes 50 years, 100 years or 150 years for bitcoin to reach the $1 quadrillion plus market cap size, that seems to be a reasonable working premise to me, even if some folks seem to believe such numbers are nutso.. and I am not even using inflation for my numbers.  I am talking in today's values.. and also presuming that bitcoin is also going to create some more value, so that if there is really ONLY $900 trillion rather than more than $1 quadrillion, those are rounding errors in the sense that more value does end up getting built through paradigm shifting technologies/innovations such as bitcoin.

Just one little quote at the end:

Ok... so you want to say that you hated S2F before it was even fashionable to do so.. great.

lol, no. Read again why I wrote that, if you want (it's a reaction on what you wrote in the paragraph I quoted.)

Fair enough.

[d5000]

Well if you have a price curve that seems to explain a vast majority of what is going on by focusing on supply and keeping demand as a constant, then why get caught up in trying to figure out if demand might have a better constant calculation.. [...] do even you are admitting that demand is included.. but you wished that it were NOT assumed to be a constant... or the formula for the constant needs to be tweaked somehow.. no problem.. tweak away..

I'll try to describe why I think that S2F has on a first glance worked so well, why I believe that it doesn't explain most factors of the last hype cycles - and some thoughts how it could be changed to replace the constant with a still simple, but not too simplistic demand-based indicator.

First, why did it work so well? We had in 2012/2013 and 2016/2017 two "post-halvening rallys", and 2021 we saw a third major price rally albeit a bit less sharp. S2F proponents argue that these were fueled mostly due to less miner rewards sold on the market. My explanation to that is a little bit different.

The first halvening had indeed a major effect on Bitcoin's available supply. Miners in 2012 were among the biggest sellers in the market, and in that situation the block reward sharply was reduced from 7200 to 3600 per day when only 10 million were mined (so supply inflation fell from ~7% to ~3.5%). So in this particular case, I guess this had really a major impact on the market, although there were also surely other factors (for example, I remember many new exchanges opened in that period, even if MtGox remained dominant).

2016/17 in my opinion it was already different. Markets were much bigger, miners began to leave the major sellers group being replaced by short/mid-term "traders", but the supply reduction was still relevant. There were already expectations of a similar post-halvening rally like in 2013. This imo helped sentiment to change and to get "the bottom in" in 2015 and fueled psychologically the (still moderate) rally in early 2016. Then just after the halvening there was a low-demand period with slightly bearish market, but in 2017 things were heating up again. I see also the shitcoin rally as a major factor here, particularly the ICO frenzy, because of their dependancy on BTC on exchanges.

Now 2020/21 I think that miners lost most of their relevancy in the sellers group. The 2020/21 rally was fueled by other factors in my opinion: first, a mostly psychologic post-halvening expectation; second the coronavirus pandemic, which made people massively register at online trading sites, either of stocks or cryptos, and led to things like the GameStop rally; and third, the "institutional investor" movement, with Tesla and Michael Saylor at the front. The last one was probably the driver for >30K prices. El Salvador came later and is imo the "culprit" for the ATH in the second half of the year.

The coronavirus pandemic's influence is particularly interesting. Before the rally we saw the deep crash to <5000$ levels, after a pretty bullish year 2019. Had this crash and the pandemic not occurred, it is likely the bitcoin hype cycle would have lead, for the first time in its history, to a new ATH before the halvening (in mid-2019, we saw already prices of only ~30% below the ATH, and the +10000 prices continued in early 2020, so March/April 2020 would have been a likely date for that ATH). But it didn't happen, so I'll not go into depth here.

What is my conclusion for a "better" S2F-influenced price model?

First, I would divide the "post-halvening rally effect" into two indicators: "real" supply effect (which can be measured with S2F) and psychological effect, with the first one declining over time, but the second one remaining relatively constant for a longer period.

Second, I would add an "usage" factor, with two components: 1) in times where blocks are not full would be majorly driven by transaction volume, and when blocks are full, by LN node stats. 2) an estimation of exchange users with the crypto.com methodology. Usage is not the same as demand, but has solid economics foundations in the Quantity Theory of Money.

These would be the two main ingredients of the formula. I would do now what PlanB did when he introduced S2F: search for the weight of S2F and "usage" the best approximate to the real price chart, and using this for.

A third ingredient could be "external factors". For example interest rates could be interesting to compare to Bitcoin prices; also the main stock markets. Regulation is another factor but this is already going to much "into the weeds" as you wrote; apart the "usage" factor should already covering these variations.

So this would roughly be my proposal for a price model. Like it or not

Ah, there's imo absolutely nothing wrong with DCA. I would also recommend this technique to every newbie, but not citing S2F as the main reason but a likely adoption growth.

For me, there seems to be some value in bitcoin's incentivizing hashpower from all over the world. [...] bitcoin has played out quite more bullishly than even my most bullish of scenarios..

I think that happened to most of us. But in my opinion this isn't a proof of Bitcoin's price increase being fueled mainly by supply-side mechanisms.

[JayJuanGee]

Well if you have a price curve that seems to explain a vast majority of what is going on by focusing on supply and keeping demand as a constant, then why get caught up in trying to figure out if demand might have a better constant calculation.. [...] do even you are admitting that demand is included.. but you wished that it were NOT assumed to be a constant... or the formula for the constant needs to be tweaked somehow.. no problem.. tweak away..

I'll try to describe why I think that S2F has on a first glance worked so well, why I believe that it doesn't explain most factors of the last hype cycles - and some thoughts how it could be changed to replace the constant with a still simple, but not too simplistic demand-based indicator.

First, why did it work so well? We had in 2012/2013 and 2016/2017 two "post-halvening rallys", and 2021 we saw a third major price rally albeit a bit less sharp. S2F proponents argue that these were fueled mostly due to less miner rewards sold on the market. My explanation to that is a little bit different.

The first halvening had indeed a major effect on Bitcoin's available supply. Miners in 2012 were among the biggest sellers in the market, and in that situation the block reward sharply was reduced from 7200 to 3600 per day when only 10 million were mined (so supply inflation fell from ~7% to ~3.5%). So in this particular case, I guess this had really a major impact on the market, although there were also surely other factors (for example, I remember many new exchanges opened in that period, even if MtGox remained dominant).

2016/17 in my opinion it was already different. Markets were much bigger, miners began to leave the major sellers group being replaced by short/mid-term "traders", but the supply reduction was still relevant. There were already expectations of a similar post-halvening rally like in 2013. This imo helped sentiment to change and to get "the bottom in" in 2015 and fueled psychologically the (still moderate) rally in early 2016. Then just after the halvening there was a low-demand period with slightly bearish market, but in 2017 things were heating up again. I see also the shitcoin rally as a major factor here, particularly the ICO frenzy, because of their dependancy on BTC on exchanges.

Now 2020/21 I think that miners lost most of their relevancy in the sellers group. The 2020/21 rally was fueled by other factors in my opinion: first, a mostly psychologic post-halvening expectation; second the coronavirus pandemic, which made people massively register at online trading sites, either of stocks or cryptos, and led to things like the GameStop rally; and third, the "institutional investor" movement, with Tesla and Michael Saylor at the front. The last one was probably the driver for >30K prices. El Salvador came later and is imo the "culprit" for the ATH in the second half of the year.

The coronavirus pandemic's influence is particularly interesting. Before the rally we saw the deep crash to <5000$ levels, after a pretty bullish year 2019. Had this crash and the pandemic not occurred, it is likely the bitcoin hype cycle would have lead, for the first time in its history, to a new ATH before the halvening (in mid-2019, we saw already prices of only ~30% below the ATH, and the +10000 prices continued in early 2020, so March/April 2020 would have been a likely date for that ATH). But it didn't happen, so I'll not go into depth here.

As I read through your above description, I was considering whether I should attempt to critique point by point or to even go into my own attempt at an overview perspective regarding various causal factors, and overall, I just find it too self-selectively problematic to be attempting to be going through those various single/multiple causal factor explanations when they are better overviewed the three dominant prominent and currently credible BTC price dynamics models of: 1)  stock to flow curves, 2) hype cycles (such as 4-year fractal - which is redundant with S2F) and coupled with 3) exponential s-curve adoption based on Metcalfe principles and network effects.  

To me, it continues to make little sense for you to be wanting to continue to be getting caught up in the various nonsense short-term explanations regarding how demand might have increased or decreased at various points in time including how public sentiment might have also changed based on various fluctuating macro factors and even the behaviors of various rich people/institutions and governments coming into the space to talk up the BTC price and through their own concrete actions of increasingly buying BTC, too... which surely these folks coming into the space - as well as the various shitcoin snake-oil salesmen imitators influencing the bitcoin space (and the
BTC price in various ways) have been kind of inevitable too..and part of network effects in regards to financialization, speculation and developmental experimentations.

In other words, I just see you getting caught up into too many details of various single/multiple cause explanations that fail/refuse to really account for overall dynamics of the three BTC price model considerations/framing that are the most relevant.

What is my conclusion for a "better" S2F-influenced price model?

First, I would divide the "post-halvening rally effect" into two indicators: "real" supply effect (which can be measured with S2F) and psychological effect, with the first one declining over time, but the second one remaining relatively constant for a longer period.

Second, I would add an "usage" factor, with two components: 1) in times where blocks are not full would be majorly driven by transaction volume, and when blocks are full, by LN node stats. 2) an estimation of exchange users with the crypto.com methodology. Usage is not the same as demand, but has solid economics foundations in the Quantity Theory of Money.

These would be the two main ingredients of the formula. I would do now what PlanB did when he introduced S2F: search for the weight of S2F and "usage" the best approximate to the real price chart, and using this for.

A third ingredient could be "external factors". For example interest rates could be interesting to compare to Bitcoin prices; also the main stock markets. Regulation is another factor but this is already going to much "into the weeds" as you wrote; apart the "usage" factor should already covering these variations.

So this would roughly be my proposal for a price model. Like it or not

Well if no one has made such modifications and modeled it out, then what is stopping you?  personally it comes off as adding a whole bunch of noise that may or may not make much of a difference.

I already stated that I acknowledge that a lot of the ideas of PlanB and his stock to flow model already existed in BTC prior to PlanB coming on the scene in early 2019.. PlanB merely formulated such ideas in a data-driven way that helped a lot of people to potentially consider BTC price dynamics in better ways including considering limited supply dynamics in a better and more meaningful framework.

Personally, I have also never placed all of my eggs in the stock to flow basket - not because I find it wrong, but probably for reasons similar to you, I believe that it lacks some explanatory angles including a need to reemphasize the four year fractal and also a need to supplement considerations of network effects and Metcalfe principles.  I am not placing my overall framework into any comprehensive model, but I do believe S2F remains part of the best of frameworks when coupled as part of a three part package...and for sure some variance in there too in terms of there is an expected mean price, but the actual price can deviate quite far above or below the mean price which would not invalidate the model but only possibly cause it to either need more time for the whole matter to play out (and catch up to the mean) or maybe the men has to be tweaked to some extent.. perhaps? perhaps?  but no need to throw out the whole model when it explains a whole hell of a lot already...

and yeah, you d5000 can add your various variables to stock to flow in order to better explain it - and hopefully you are able to do it in a somewhat comprehensive way because it is pretty damned vague as you are currently explaining what you are going to add and how it is going to be added to perhaps tell us where we have been historically in terms of where we are at now and where we are likely to be going.

Ah, there's imo absolutely nothing wrong with DCA. I would also recommend this technique to every newbie, but not citing S2F as the main reason but a likely adoption growth.

Well you can withhold information if you like and provide some vague ideas, and sure of course, everyone has to figure out for himself/herself whether to get into bitcoin and how to go about it.  Another thing is there are various levels of both receptivity and willingness for normies to actually look into any matter that you might spend time presenting/explaining to them.   A lot of newbies and normies out there in society do not even closely know what the fuck bitcoin is, even if they had heard about the name.. and they can maybe describe it from some kind of theoretical perspective, and surely it can take a very long time for them to actually even learn how bitcoin is differentiated from the various kinds of shitcoin projects, IPOs, Meme coins, DeFi marketed nonsense, NFTs - and some people will learn by getting distracted into nonsense, and a few will be able to focus on bitcoin right from the start to learn about bitcoin first - but still might get tempted into various distracting nonsenses about various shitcoins and also various shit theories about how bitcoin got to where it is (price and otherwise), where bitcoin is at currently (perhaps actual price compared to potential price) and where it is likely to go (various ways to attempt to accomplish expected value (ev) calculations).

Part of my point is that we can choose how much to share with folks regarding our own journey into bitcoin and our historical or current practices, and even spending a lot of time with folks in discussing these matters might cause them to remain apathetic or failing refusing to act.. and surely getting started with DCA'ing can at least get some folks started and inspire them to attempt to learn more about bitcoin.. not always but sometimes.  People are busy with their own lives and sometimes it can take a whole hell of a lot of time just to see that someone actually takes an active stance to start DCA'ing into bitcoin and to spend some time learning along the way (might have to move something else out of their schedule, no?.. not easy for any of us.. even if we are a student, for a variety of reasons we might not have bitcoin on the list of topics that we are aiming to learn first).

For me, there seems to be some value in bitcoin's incentivizing hashpower from all over the world. [...] bitcoin has played out quite more bullishly than even my most bullish of scenarios..

I think that happened to most of us. But in my opinion this isn't a proof of Bitcoin's price increase being fueled mainly by supply-side mechanisms.

Seems to be a pretty strong piece of evidence of real world behavior of power behind the idea of securing the network and securing the ideas of bitcoin's scarcity as one of the rules.. of course, there are some other rules too that are enforced.. and if you do not attempt to account for how much power is going into bitcoin, you may well misunderstand (or misappropriate) what is bringing value to it and why so many folks are fighting to get it (mine it) and to have their various ongoing mining operations in place all over the world.. the running of nodes too - enforces the scarcity rules.. you going to try to change bitcoin?  or say some other system can challenge it?  better look at trying to steal (or co-opt) some of that hashpower.. how do you do it? incentives?  scarcity incentives?  cycles of bitcoin issuances and reduction of supply with the passage of time?  incentives for providing hashpower in bitcoin seems connected to the way supply is structured in bitcoin to me.

[d5000]

In other words, I just see you getting caught up into too many details of various single/multiple cause explanations that fail/refuse to really account for overall dynamics of the three BTC price model considerations/framing that are the most relevant.

I'll try to explain why I think that these details matter. To be brief I'll center on one example: Lightning Network.

Bitcoin until 2018 (when LN was first implemented on mainnet) had a massive scalability problem. This would have limited its use cases a lot - only 1-2% of the world population, in the most optimistic scenario (nobody spamming nor using BTC more than a handful of times) would have been able to make a single transaction per year (be it for commerce, or savings, or speculation) if a second layer solution wasn't available.

LN changed that, to the extent that it is now possible to "onboard" the whole world (with some trickery like channel factories and user management, but it will work eventually). This means that a technical achievement, which can't be explained by S2F or other simplistic theories, immensely enlarged the potential user base. This changes the potential maximum value of the network and thus the whole potential price growth equation.

In my opinion even these small examples already invalidate a mostly S2F based approach. I'm also pretty much sure that the price increase of 2021 was only possible because of the positive scalability situation LN has generated. Scalability issues are no longer a threat to Bitcoin's overall viability.

Here's an article (not by me) that mentions other examples:

The following events all helped BTC reach all-time highs this year:

    Taproot,
    El Salvador’s adoption of Bitcoin,
    the SEC’s first approval of an ETF,
    and record-breaking fiscal stimulus.

These aren't "details"/"noise" but major milestones, without them the adoption curve and also the price would look different.

Well if no one has made such modifications and modeled it out, then what is stopping you?

I don't rule out to eventually build such a model. But first I'd like to investigate if there are other models already made which go in the same direction.

personally it comes off as adding a whole bunch of noise that may or may not make much of a difference.

The "noise" has the potential to make the whole model more robust. PlanB has published his model in 2019. Basically his model "worked" until mid-2021, thus for two years (because the events before are better explained by his magical constant). If the price now continues to diverge from the S2F model, we can conclude that it's not an adequate model, to say it friendly.

If we find, however, the correct "noise" components then the model could be more flexible, in the sense of reacting to a slower or faster demand curve.

I already stated that I acknowledge that a lot of the ideas of PlanB and his stock to flow model already existed in BTC prior to PlanB coming on the scene in early 2019.

Yep, you're right - this is what I mentioned as the "post-halving rally expectation". Basically the idea is very simple.

PlanB merely formulated such ideas in a data-driven way that helped a lot of people to potentially consider BTC price dynamics in better ways including considering limited supply dynamics in a better and more meaningful framework.

And here I disagree again. His model is too static to be "meaningful", in my opinion.

Personally, I have also never placed all of my eggs in the stock to flow basket - not because I find it wrong, but probably for reasons similar to you, I believe that it lacks some explanatory angles including a need to reemphasize the four year fractal and also a need to supplement considerations of network effects and Metcalfe principles.

That's good.

Well you can withhold information [...]

If I say to a newbie "Invest in Bitcoin, it will has an inmense adoption potential" instead of "Invest, because of S2F", then I'm not "witholding information". I would of course not withold the information about the scarcity model itself (halving cycle etc.), as I've stated already in this discussion, I consider a solid scarcity model a basic requirement for every "currency" or "asset". But why should I mention a model I consider wrong?

I however agree with the rest of what you wrote in that section about DCA/newbies.

Seems to be a pretty strong piece of evidence of real world behavior of power behind the idea of securing the network and securing the ideas of bitcoin's scarcity as one of the rules.. of course, there are some other rules too that are enforced.. and if you do not attempt to account for how much power is going into bitcoin, you may well misunderstand (or misappropriate) what is bringing value to it and why so many folks are fighting to get it (mine it) and to have their various ongoing mining operations in place all over the world.

For me "why so many folks are fighting to get int (mine it)" has a much simpler answer: because mining is a profitable business model. Bitcoin's scarcity is, again, the requirement for that to work. Miners obviously know about Bitcoin's scarcity model. But not necessarily because of S2F or generally a rising price prediction. They would be also happy if the current price/profitability simply continues.

the running of nodes too - enforces the scarcity rules.. you going to try to change bitcoin?  or say some other system can challenge it?  better look at trying to steal (or co-opt) some of that hashpower.. how do you do it? incentives?  scarcity incentives?  cycles of bitcoin issuances and reduction of supply with the passage of time?  incentives for providing hashpower in bitcoin seems connected to the way supply is structured in bitcoin to me.

I think it wouln't be easy for any altcoin operator to "steal" relevant hashpower from Bitcoin, because of all the advantage (above all regarding brand image and network effect) it has accumulated over the years. But if I wanted to try hard, I would focus on demand stimulation. Because the other way around (providing an even "more scarce" coin, e.g. one with completely fixed supply) has failed every time it was attempted.

So no, I don't see scarcity as the main incentive for providing hashpower. It is only the pre-requisite for any potential demand increase/adoption to work (because only if it's scarce, it's an asset), but it isn't the dominant price-predictive indicator for me.

[JayJuanGee]

In other words, I just see you getting caught up into too many details of various single/multiple cause explanations that fail/refuse to really account for overall dynamics of the three BTC price model considerations/framing that are the most relevant.

I'll try to explain why I think that these details matter. To be brief I'll center on one example: Lightning Network.

Bitcoin until 2018 (when LN was first implemented on mainnet) had a massive scalability problem. This would have limited its use cases a lot - only 1-2% of the world population, in the most optimistic scenario (nobody spamming nor using BTC more than a handful of times) would have been able to make a single transaction per year (be it for commerce, or savings, or speculation) if a second layer solution wasn't available.

LN changed that, to the extent that it is now possible to "onboard" the whole world (with some trickery like channel factories and user management, but it will work eventually). This means that a technical achievement, which can't be explained by S2F or other simplistic theories, immensely enlarged the potential user base. This changes the potential maximum value of the network and thus the whole potential price growth equation.

Sure, I am personally familiar with such history, including the blocksize wars, and I really doubt your thesis that LN saved bitcoin from itself as a potentially deficient network.

Of course, LN brought additional value to bitcoin, yet a vast majority of the power of bitcoin was already embedded in its original design.. and sure, over the years, the various software updates have brought additional value, utility and abilities to continue to build on such an innovative and paradigm shifting phenomena that had already gone live in 2008 with the issuance of the whitepaper, and January 3, 2009 with the mining of the first block.

I am not very receptive to your assertions that bitcoin was materially and sufficiently inadequate prior to LN, segregated witness, taproot or any other subsequent and ongoing incremental innovations.. and for sure over the years, bitcoin's software development in terms of both power and useability are just part and parcel of one of the network effects related to development of the software, developers and ongoing developments that have been ongoingly taking place over the last 13 years + of bitcoin's existence.

In my opinion even these small examples already invalidate a mostly S2F based approach.

You can see it how you wish, and I don't even feel inspired to battle you further on these matters because I believe that I have already largely responded.

I'm also pretty much sure that the price increase of 2021 was only possible because of the positive scalability situation LN has generated. Scalability issues are no longer a threat to Bitcoin's overall viability.

From my perspective, that seems like a pretty lame explanation, but hey, you are free to believe what you like.

Here's an article (not by me) that mentions other examples:

The following events all helped BTC reach all-time highs this year:

    Taproot,
    El Salvador’s adoption of Bitcoin,
    the SEC’s first approval of an ETF,
    and record-breaking fiscal stimulus.

These aren't "details"/"noise" but major milestones, without them the adoption curve and also the price would look different.

No reason for me to even address these... and like I said, you and a variety of other people have the right to get on whatever various tangents that you like in terms of attempting to understand where we are at, how we got here and where we might be going....

Well if no one has made such modifications and modeled it out, then what is stopping you?

I don't rule out to eventually build such a model. But first I'd like to investigate if there are other models already made which go in the same direction.

Fair enough.

personally it comes off as adding a whole bunch of noise that may or may not make much of a difference.

The "noise" has the potential to make the whole model more robust. PlanB has published his model in 2019. Basically his model "worked" until mid-2021, thus for two years (because the events before are better explained by his magical constant).

Your deeming of the models failure does not mean that it failed... Again.. do what you like, but it seems quite far from failing, like I already asserted several times.

If the price now continues to diverge from the S2F model, we can conclude that it's not an adequate model, to say it friendly.

Maybe?  We are not even two years into this particular halvening period that S2F projects to average $100k for the whole halvening period.. so yeah.. perhaps the BTC price is going to continue to diverge, but as far as I can tell the model seems to be pretty much on schedule, or pretty damned close to being on schedule.

Maybe it is worth it for me to reiterate this one more time.  Largely S2F is attempting to project that BTC prices will average $100k for the whole of this particular halvening period.... so for sure, half way through the halvening period the actual price is way undershooting the projected $100k BTC price for the whole period..

Looking at the 104-week moving average (which is the average BTC price for the past two years), we can see that currently the 104-week moving average is at about $32k..

And if we look at the 208-week moving average (which is the average weekly price for the last four years), we see that it is at about $19,500, so for sure, the 104-week moving average already shows an already existing average that is way below $100k, and the 208-week moving average has a decently long way to catch up to get to $100k by the next halvening (during this halvening period)...

From my perspective it is way the hell too premature to be writing it off as if it were impossible or if it were a lost cause, blah blah blah... Even if we were to stick with a relatively historical average of how the 208-week moving average has been moving up, we are seeing that the 208-week moving average has historically moved up about 75% per year (and last year the 208-week moving average moved up around 130%)(look at my projection of the 208-week moving average)...

You can also look at specific dates of the 200-week moving average as compared with spot price on this website.
seems like a bunch of S2F deniers wanting to both de-emphasize S2F and to cause people to get distracted by a bunch of non-grounded whimsical nonsense who keep wanting to denigrate the importance of S2F, and as I already said several times, there is a lot of factual price movement that still lines up with S2F, but likely S2F is not the only reference to explain factual/logical based context for where we are at, how we got here and where we are likely going.



By the way, if we continue to get something like 75% appreciation of the 208-week moving average in the coming couple of years, that will still get us to around $88k by May 2024, which would hardly cause me to want to throw out S2F as if it were broken in any kind of meaningful way... even if it may well need to get tweaked to account for the data, rather than the projection of the data... .

I will also admit that it may well be a bit too presumptuous to project that the 208-week moving average is going to continue to move up at an average of 75% per year, but hardly seems as if there is any kind of urgent need to rush out and fix it.. because surely we can watch the data as we go and to see if the 208-week moving average continues to move up at that pace or a likely lower pace as bitcoin continues to mature and its overall market cap continues to grow... 

If we find, however, the correct "noise" components then the model could be more flexible, in the sense of reacting to a slower or faster demand curve.

Nothing wrong if you can figure out ways to project the future BTC price more accurately.. no one is going to denigrate you for that.. but still seems to me that S2F is going to end up playing some kind of ongoing meaningful part, even if it might become lesser and lesser of a part.

I already stated that I acknowledge that a lot of the ideas of PlanB and his stock to flow model already existed in BTC prior to PlanB coming on the scene in early 2019.

Yep, you're right - this is what I mentioned as the "post-halving rally expectation". Basically the idea is very simple.

Well.. attempted to be explained in a kind of everyman way, even though still based on attempting to scientifically plot out the data points and to describe the underlying logic in scientific terms that are framed also in layman ways of expressing it.

PlanB merely formulated such ideas in a data-driven way that helped a lot of people to potentially consider BTC price dynamics in better ways including considering limited supply dynamics in a better and more meaningful framework.

And here I disagree again. His model is too static to be "meaningful", in my opinion.

He plots out the weekly moving averages.. or is it the monthly?  whatever... it accounts for enough in my opinion.. why overcomplicate matters with too much (if any) irrelevant baloney.

Personally, I have also never placed all of my eggs in the stock to flow basket - not because I find it wrong, but probably for reasons similar to you, I believe that it lacks some explanatory angles including a need to reemphasize the four year fractal and also a need to supplement considerations of network effects and Metcalfe principles.

That's good.

Well you can withhold information [...]

If I say to a newbie "Invest in Bitcoin, it will has an inmense adoption potential" instead of "Invest, because of S2F", then I'm not "witholding information". I would of course not withold the information about the scarcity model itself (halving cycle etc.), as I've stated already in this discussion, I consider a solid scarcity model a basic requirement for every "currency" or "asset". But why should I mention a model I consider wrong?

I however agree with the rest of what you wrote in that section about DCA/newbies.

Seems to be a pretty strong piece of evidence of real world behavior of power behind the idea of securing the network and securing the ideas of bitcoin's scarcity as one of the rules.. of course, there are some other rules too that are enforced.. and if you do not attempt to account for how much power is going into bitcoin, you may well misunderstand (or misappropriate) what is bringing value to it and why so many folks are fighting to get it (mine it) and to have their various ongoing mining operations in place all over the world.

For me "why so many folks are fighting to get int (mine it)" has a much simpler answer: because mining is a profitable business model. Bitcoin's scarcity is, again, the requirement for that to work. Miners obviously know about Bitcoin's scarcity model. But not necessarily because of S2F or generally a rising price prediction. They would be also happy if the current price/profitability simply continues.

Still seems that S2F would play a part, but of course, miners might have a variety of ways of calculating their business considerations and some miners likely cash out on a regular basis and other miners save more of their coins.  I believe the last couple of years, some of Saylor's ideas have become more pervasive in mining in terms of contributing to more of them attempting to hold onto more of their coins... and of course, there are going to be quite a few variables in terms of size of operation or even how long that they have been in it and even some of their geographical/jurisdictional concerns with the miners.

the running of nodes too - enforces the scarcity rules.. you going to try to change bitcoin?  or say some other system can challenge it?  better look at trying to steal (or co-opt) some of that hashpower.. how do you do it? incentives?  scarcity incentives?  cycles of bitcoin issuances and reduction of supply with the passage of time?  incentives for providing hashpower in bitcoin seems connected to the way supply is structured in bitcoin to me.

I think it wouln't be easy for any altcoin operator to "steal" relevant hashpower from Bitcoin, because of all the advantage (above all regarding brand image and network effect) it has accumulated over the years.

Sure.. Several have tried over the years, but there does not seem to be a whole hell of a lot of evidence of long term success of any of the shitcoins in that direction, so far... and you are free to bet on whatever horse that you like, including getting involved with various ongoing smoke and mirror sham imitation snakeoil projects.  Lots of folks get diverted in to such nonsense, and some make money through it too... again, seems like further noise to me, but lots of rich snot-nosed 14 years olds would laugh in my face regarding all the money they made in their baloney ponzi schee or money printing "creative" projects.

But if I wanted to try hard, I would focus on demand stimulation. Because the other way around (providing an even "more scarce" coin, e.g. one with completely fixed supply) has failed every time it was attempted.

Hard to get even more scarce than bitcoin, even though some of the bullshit NFTs like to market themselves as such... but likely to find out that there is something about security through bitcoin as compared with whatever various chain some of that supposedly scarce baloney is propagated and marketed...

By the way, scarce is important, but liquid is important too.. and bitcoin has both and still building.

So no, I don't see scarcity as the main incentive for providing hashpower. It is only the pre-requisite for any potential demand increase/adoption to work (because only if it's scarce, it's an asset), but it isn't the dominant price-predictive indicator for me.

Seems that miners building around bitcoin have some better assurances than if they build around other projects, even though there are some miners who are creative in their switching abilities.. and so yeah, it could take 10, 20, 50 years to wind out a variety of these bouncing around of hashpower.. even though it seems that bitcoin is not even close to having anything with something close to rival it. the china mining was a good test of bitcoin's hashpower fluctuations in 2021.. and now bitcoin is back to record high hashpower, which seems to show that incentives to mine bitcoin seem to be working.. unless it is some kind of BIG ploy.. which it seems to NOT be because bitcoin mining hashpower does seem to have quite a bit of geographical diversity and even diversity in those controlling the mining.. even though it is not 100% transparent, either. 

Bitcoin mining does not seem to be broken in any kind of substantial or meaningful way, and I will again venture to assert that it is quite likely that there are a lot of very strong incentives that have already been designed into the reason that miners want to mine on bitcoin, including its openness, scarcity and difficulty adjustments that help for the measuring and monitoring of the network.

[d5000]

I am not very receptive to your assertions that bitcoin was materially and sufficiently inadequate prior to LN, segregated witness, taproot or any other subsequent and ongoing incremental innovations..

Well, I didn't really want to say something like "inadequate". However, we don't know what Bitcoin's final niche will be. Without LN, its best case scenario could have been a popular Internet currency for remittances, international e-commerce and some saving/speculation. This would also have been a "success".

But with second layers like LN, the maximalist and ultra-maximalist scenarios (i.e. Bitcoin as the main value mechanism of the world) have become possible, which before weren't, at least not if we assume that users should use decentralized mechanisms.

So what LN changed is not a question of "success" / "not success" or "adequate" / "inadequate" but a question of the maximum "grade" of success Bitcoin can achieve, which largely depends on the user base it can attend.

and for sure over the years, bitcoin's software development in terms of both power and useability are just part and parcel of one of the network effects related to development of the software, developers and ongoing developments that have been ongoingly taking place over the last 13 years + of bitcoin's existence.

The problems related to Bitcoin's scalability aren't trivial at all, so it may have been possible that something like LN was never discovered. For example, second-layer development initially centered on sidechains, but even 6-8 (or more?) years after the first sidechain concept we haven't a working decentralized model for Bitcoin (Drivechain is cool, but its still, after several years, in its absolute infancy and has still to prove its usefulness). However you're right that "developer network effect" matters and there are a lot of incentives to find solutions for Bitcoin's problems (Bitcoin millionaires can fund development, etc.).

You can see it how you wish, and I don't even feel inspired to battle you further on these matters because I believe that I have already largely responded.

OK.

From my perspective it is way the hell too premature to be writing it off as if it were impossible or if it were a lost cause

I even agree here with you that it's still premature, perhaps I wasn't clear enough in the last post. The scenario where the S2F-based price prediction diverges fundamentally from the real price evolution is a long term scenario. The next year we can't say its prediction has failed, purely from analyzing price.

But what we can, is look at its basic hypotheses which sustain it, and that's where I think it fails. But yeah, I think my point was already made clear enough.

But if I wanted to try hard, I would focus on demand stimulation. Because the other way around (providing an even "more scarce" coin, e.g. one with completely fixed supply) has failed every time it was attempted.

Hard to get even more scarce than bitcoin, even though some of the bullshit NFTs like to market themselves as such... but likely to find out that there is something about security through bitcoin as compared with whatever various chain some of that supposedly scarce baloney is propagated and marketed...

You could make a blockchain where all coins are mined in the first year, and then miners only collect transaction fees. I think these things were already attempted (albeit mostly with premined shitcoins, which changes a lot I think). But I totally agree here: it will be 99,9% fail because of Bitcoin's already big advantage. And yeah:

By the way, scarce is important, but liquid is important too.. and bitcoin has both and still building.

Completely d'accord.

Bitcoin mining does not seem to be broken in any kind of substantial or meaningful way, and I will again venture to assert that it is quite likely that there are a lot of very strong incentives that have already been designed into the reason that miners want to mine on bitcoin, including its openness, scarcity and difficulty adjustments that help for the measuring and monitoring of the network.

Agree here too, mostly - Bitcoin's incentive model is very well thought out, and I think the way the halving cycle is designed is also a component of its attractiveness. The only problem I have is with the predictive value of a model which only (or mostly) takes into account the supply fluctuations originated by halvings, and not other (imo more important) factors.

I believe we can close this discussion, we simply disagree on the weight we would attribute to the halving cycle (and thus, S2F) for price predictions.

[JayJuanGee]

I am not very receptive to your assertions that bitcoin was materially and sufficiently inadequate prior to LN, segregated witness, taproot or any other subsequent and ongoing incremental innovations..

Well, I didn't really want to say something like "inadequate". However, we don't know what Bitcoin's final niche will be.

We are not going to quibble about which word to use are we?  You have already asserted your opinion that there was something wrong with bitcoin prior to the addition of LN.  I don't agree with you, but you have your right to whatever assessment you want to make, even if it leads you into what I believe is a ridiculous way of assessing the matter...

From my perspective, that kind of thinking has a lot of muddled with BIG blocker nonsense talking points, and they were wrong about a lot of things - even if you want to continue to carry some of their underlying values by perpetuating some of their talking points, that's up to you.

Without LN, its best case scenario could have been a popular Internet currency for remittances, international e-commerce and some saving/speculation. This would also have been a "success".

First, our reality is that we do have a world with LN and a variety of other potential second layer solutions, so I see little need to speculate in this regard about the non-existence of LN and various second layer solutions.. they are a reality and a part of bitcoin's progressive journey in development (and not even necessarily any kind of outrageous surprise, either).

Second, maybe it can be helpful to consider bitcoin in terms of hypothetically what if this had not happened.. sure I will give you that..even if it is not seeming to be very in touch with actual on the ground facts.

Third, perhaps you have listed most of bitcoin's possible use cases absent LN/second layer solutions, and sure we agree that bitcoin is a success just with those.... if that happens to catch everything.

But with second layers like LN, the maximalist and ultra-maximalist scenarios (i.e. Bitcoin as the main value mechanism of the world) have become possible, which before weren't, at least not if we assume that users should use decentralized mechanisms.

Maybe.  Perhaps.

Seems like a bit of a nonsense and detached from facts speculation, and I don't see how fruitful it is.

Maybe I have been too traumatized by too many trolls and disingenuine posters in the past.  They post about so many pie in the sky outlandish possible scenarios that could happen, and sure it is true that those things could happen, but we have more likely scenarios 1, 2, 3 and 4 and they are not even discussed, instead we devolve into talking about pie in the sky scenarios 5, 6, 7, and 8.  I don't find that as very good use of my time.. and it seems to devolve into thread cluttering.. taking us away from the more important and more likely scenarios 1, 2, 3 and 4.

So what LN changed is not a question of "success" / "not success" or "adequate" / "inadequate" but a question of the maximum "grade" of success Bitcoin can achieve, which largely depends on the user base it can attend.

Ok... no problem.  Bitcoin has more use cases with LN (and other second layer solutions) than without LN (and other second layer solutions).. agreed.

and for sure over the years, bitcoin's software development in terms of both power and useability are just part and parcel of one of the network effects related to development of the software, developers and ongoing developments that have been ongoingly taking place over the last 13 years + of bitcoin's existence.

The problems related to Bitcoin's scalability aren't trivial at all, so it may have been possible that something like LN was never discovered.

Hard to know.  There was a particular path that the 2015-2017 block wars took, and at some point in late 2015, Peter Wuille suggested Segregated Witness, which had been a problem that he had already been working on for another context, and it seemed to end up fitting well with resolving some of the blocksize and transaction issues that were perceived in late 2015.. and furthermore, Luke DashJR had made some kind of proposal to be able to accomplish such upgrade as a softfork rather than a hardfork, so that took bitcoin's development in that direction..

Whether the blocksize and scalability wars during that time were serious or trivial, they were about more than just scalability  and there were governance issues in the mixed way in which the matters were resolved and the solutions came about. It seems a bit weird to just attempt to talk about those kinds of resolution of the problem matter and about how bitcoin ended up resolving without putting it in the proper context and merely suggesting some kind of abstract problem about scalability - because scalability resolved in a direction in which it is never really completely resolved, but seems to be something that is going to continue to come up from time to time in terms of whether some adjustments might need to continue to be made along the way... and whether they are dramatized in the future or not is still to be seen.. I would imagine that there is going to continue to be some drama around these issues because not everyone agrees with how bitcoin is going and there are also ongoing attacks from within, too.

For example, second-layer development initially centered on sidechains, but even 6-8 (or more?) years after the first sidechain concept we haven't a working decentralized model for Bitcoin (Drivechain is cool, but its still, after several years, in its absolute infancy and has still to prove its usefulness). However you're right that "developer network effect" matters and there are a lot of incentives to find solutions for Bitcoin's problems (Bitcoin millionaires can fund development, etc.).

For sure, open source is interesting, and some proposed solutions might be before their time, but become more relevant at a later date.. and yeah, sometimes the funding is questionable, and sometimes developers might be lured towards projects to get paid rather than not paid, but we do have some seemingly benevolent funders in bitcoin, too... and we have a lot of people working on solving matters that they perceive as problems (issues) for free too.  Maybe aspects of our discussion here fits in this category, too?  Perhaps?

You can see it how you wish, and I don't even feel inspired to battle you further on these matters because I believe that I have already largely responded.

OK.

From my perspective it is way the hell too premature to be writing it off as if it were impossible or if it were a lost cause

I even agree here with you that it's still premature, perhaps I wasn't clear enough in the last post. The scenario where the S2F-based price prediction diverges fundamentally from the real price evolution is a long term scenario. The next year we can't say its prediction has failed, purely from analyzing price.

We have to see where the price goes first.  So I don't see how fruitful it is to say that if the price goes down instead of up, then we have to reassess S2F and perhaps pronounce it as dead at that time.  O.k... fine no problem...


but you seem to really be saying that "I am already anticipating that we are going to need to proclaim S2F to be dead by next year, so I am going to get ahead of the game, and pronounce it dead early."

Surely, you can pronounce it dead early if you like.  That's up to you.  I would rather just wait it out, and see how the data plays out before proclaiming it to be dead, and so at this time, from my perspective, we seem to have a valid S2F model that happens to currently be in a status of underperformance of expectations.  Maybe it will catch up?  maybe it will not?  I give few shits.. If it does it does, and if it does not it does not, but it seems to still be fairly on course, even if there is some current underperformance, so I am not going to be throwing it out and making up some other pie in the sky bullshit when S2F still remains quite explanatory.. even with its current underperformance status.  You are free to assess however you like and to prematurely throw it out and then have to come running back with your tail between your legs because you had been too rash.. I don't know if that will happen, but still I will proclaim those throwing out S2F and spouting out all the various ways S2F is dead don't even understand what the fuck they are talking about.. that's my continued perspective.

But what we can, is look at its basic hypotheses which sustain it, and that's where I think it fails. But yeah, I think my point was already made clear enough.

Yes... we seem to be beyond getting repetitive on this aspect.

But if I wanted to try hard, I would focus on demand stimulation. Because the other way around (providing an even "more scarce" coin, e.g. one with completely fixed supply) has failed every time it was attempted.

Hard to get even more scarce than bitcoin, even though some of the bullshit NFTs like to market themselves as such... but likely to find out that there is something about security through bitcoin as compared with whatever various chain some of that supposedly scarce baloney is propagated and marketed...

You could make a blockchain where all coins are mined in the first year, and then miners only collect transaction fees. I think these things were already attempted (albeit mostly with premined shitcoins, which changes a lot I think). But I totally agree here: it will be 99,9% fail because of Bitcoin's already big advantage. And yeah:

By the way, scarce is important, but liquid is important too.. and bitcoin has both and still building.

Completely d'accord.

Bitcoin mining does not seem to be broken in any kind of substantial or meaningful way, and I will again venture to assert that it is quite likely that there are a lot of very strong incentives that have already been designed into the reason that miners want to mine on bitcoin, including its openness, scarcity and difficulty adjustments that help for the measuring and monitoring of the network.

Agree here too, mostly - Bitcoin's incentive model is very well thought out, and I think the way the halving cycle is designed is also a component of its attractiveness. The only problem I have is with the predictive value of a model which only (or mostly) takes into account the supply fluctuations originated by halvings, and not other (imo more important) factors.

I believe we can close this discussion, we simply disagree on the weight we would attribute to the halving cycle (and thus, S2F) for price predictions.

Yes.. we have beaten this whole thing to death a bit more than either of us might be able to further tolerate and either of us could keel over if we continue.   

[JayJuanGee]

Nothing too much going on with S2F recently - except that PlanB is still expecting the reversion to the $100k anticipated mean, and now he is saying "by 2023"... Interesting, no?

His most recent tweet:  "Both S2F and logarithmic regression point to $100K in 2023."




https://twitter.com/100trillionUSD/status/1493207617820315650

The main reason that I came to this thread was because I had been thinking about my earlier post regarding any coin/project/protocol would need to be more than 10x greater than bitcoin to displace it - like what I said here:

That's bullshit d5000.  The fact that stock to flow to a bunch of shitcoins means that it is not valid when applied to bitcoin.

I agree with you that several altcoins are completely different assets than Bitcoin, because of their centralized and sometimes scammy nature. But that doesn't apply to all of them. There are more than hundred altcoins which technically are similar to Bitcoin (no premine, no centralized group in charge etc.).

I still think that you need to be careful with those kinds of granular comparisons of unequal assets that likely do not matter very much in the end.

Yeah.. I don't like when people proclaim that bitcoin is only in the lead because it was first, but there is something to being first in terms of considering how various networking effects evolve, and when we are dealing with something such as money or storage of value, there is likely a bit of natural gravitation towards one standard.. especially if the standard has superior qualities in terms of Gresham's law considerations.

In other words, you may potentially have already heard about the idea that if you want to replace an incumbent you better be something like 10x better than the incumbent, otherwise you do not have any kind of meaningful chance.. beyond potentially temporarily (perhaps 50 years or more?) deceiving others into believing that you have some kind of a chance... in other words, value is going to continue to gravitate into the incumbent, absent if you are able to achieve something like a 10x or more improvement upon the incumbent so that it becomes worthwhile to strive to replace the incumbent rather than the more logical route of improving upon the incumbent.. to the extent that the incumbent might have some capacities to improve.

you are getting into comparing various similar coins, and let's even give the benefit of the doubt that some of them might be several times better than bitcoin, but it still ends up being a BIG SO FUCKING WHAT because they are not even close to 10x better than bitcoin.

I understand that you might be tempted to engage in such comparison because you will proclaim that NOT very much time has passed, and it has ONLY been 13 years, so how could bitcoin gain such an incumbency status? and seems to me that you are failing and refusing to account for the fact that Bitcoin is not just Bitcoin, but there is a lot of building that is going on around bitcoin and there are not really any major flaws in bitcoin, so ancillary actors continue to build upon bitcoin rather than taking chances with some other thing that happens to NOT be 10x better.. they are not going to take chances on such products that are not clearly superior to bitcoin.. even though those various shitcoins get all kinds of hype, they do not convince smart money/people to defect over to them... the smart money and smart people remain in bitcoin...

It is like the analogy that Trace Mayer used to use about the professional football team compared with the junior varsity.. the junior varsity does not have a chance.. they will get crushed.. and continue to get crushed even if they engage in all kinds of marketing.. there is not enough there there in order to actually allow them to compete in any kind of substantive and meaningful way.

Today, I had been thinking further about this idea that any challenger has to be at 10x better than bitcoin in order to overtake it, because there are probably 100s or even 1,000s of shitcoins that have made various improvements upon bitcoin that would have been better than bitcoin if those features had been in bitcoin at the time of bitcoin's implementation, and if they are wielding features that are 50% better or some multiple better than bitcoin, whether we are talking about transactions or blockchain management, then surely bitcoin can absorb/adopt those features on level 1 or some other 2nd or 3rd layer, and part of the criticism of bitcoin may well be that it is NOT going to be able to implement/absorb or adopt such new and improved features because such features were not "built-into" bitcoin at the beginning... yet since there are people building their businesses around bitcoin (network effects), that particular feature is going to need to be 10x better in order to attract the network effects over to it, rather than bitcoin. 

Getting back to stock to flow, part of the criticism that S2F is not correct happens to have some presumptions that bitcoin is not strong enough in order to really have the empowerment of the scarcity that it says that it has, and shitcoins/projects are taking away from some of this scarcity (and going to displace bitcoin).

Hey, I have no problem moving myself over to some other project or coin if it is actually going to become the bitcoin displacer (and the new incumbent), but many of us already likely realize the reality of the matter to be that so many touted features in various shitcoins (supposed bitcoin killers) might appear "on paper" to actually be 10x better than bitcoin, but still those features have to be so clear and convincing to lure bitcoin's network effects over to them... which many of us likely can recognize the difference between touted features (snake oil salesmen - or on paper features) versus the real deal application of such features..

We also, likely realize that nothing is either close to bitcoin or even close to actually having 10x or better features than bitcoin that would inspire even laypersons to gravitate over to it (beyond those laypersons who are temporarily deceived into going over to such shitcoin project hoping that they will become a rich early adopter, just in case the network effects are coming over to their shitcoin rather than staying on bitcoin)..

BCH and BSV have served as pretty decent examples of how much better the BIG block ideas have been... and got a lot of normies (and even smart people) reckt who believed in the BIG blocker ideas.  Furthermore, their dreams of getting rich quicker through their new innovative BIG blocker coins have been snuffed out.  BIG blocks was not a better idea.. and surely not anything close to 10x better.

[fillippone]

Nothing too much going on with S2F recently - except that PlanB is still expecting the reversion to the $100k anticipated mean, and now he is saying "by 2023"... Interesting, no?

His most recent tweet:  "Both S2F and logarithmic regression point to $100K in 2023."




https://twitter.com/100trillionUSD/status/1493207617820315650

<JJG wall of Text>

Plan B is desperate to keep the S2F model alive, and I think he has a point, but as long as we keep on the 1sd+ Of the chart, the narrative can be hard for him.

Also I think it’s not completely fair to change the model conclusions: the said “100K by Dec 2021”, not 100K as Halving Era Average.
You all know how I like the man, but this delusional changes of perspective don’t make him honour.

[JayJuanGee]

Nothing too much going on with S2F recently - except that PlanB is still expecting the reversion to the $100k anticipated mean, and now he is saying "by 2023"... Interesting, no?

His most recent tweet:  "Both S2F and logarithmic regression point to $100K in 2023."




https://twitter.com/100trillionUSD/status/1493207617820315650

<JJG wall of Text>

Plan B is desperate to keep the S2F model alive, and I think he has a point, but as long as we keep on the 1sd+ Of the chart, the narrative can be hard for him.

Also I think it’s not completely fair to change the model conclusions: the said “100K by Dec 2021”, not 100K as Halving Era Average.
You all know how I like the man, but this delusional changes of perspective don’t make him honour.

I get confused too about what the hell PlanB had been saying at various points in time because he did get caught up in some seeming flaming wars and then too many specifics in his interpretation, sometimes.   

I believe that the S2F model has always said $100k as an average for the period.. but he mixed up his discussion of his "proprietary" floor model with his S2F model when getting into some of those specifics. .and I was never really any fan of getting into specifics..

Of course, staying within 1 SD is way better than getting into 2SD.. and probably if the BTC price spends too much time outside of 2SD or the edge of 2SD, there is some kind of tweaking that is needed with the model. 

I know that a lot of people say bitcoin is math and all that bullshit, but there are still a lot of weak aspects that cause BTC price to be both influenced by human behavior and to be manipulated by human behavior, so in that regard, I have no problem with any kind of model to be tweakable to account for actual facts as they play out... ... and I know that since my early days on the forum I would criticize quite a few members who had similar models to the S2F model and seemed to be too overly reliant upon math and trying to lock bitcoin price into some kind of exact (rather than loose) formula.

At the sake of redunancy, I still think that S2F remains amongst the best of the models that are out there, and even if there ends up needing to be some tweaking of what the average ends up being for this halvening period to have to reduce it from $100k to $80k or even to $60k, I doubt that there is any major issue from my point of view regarding those kinds of tweakings, if they were to have to take place.  I already mentioned that a mere ongoing trajectory of 75% annual increases in the 200-week moving average (which is completely consistent with overall historical numbers - and even low as compared with the 2021 performance of 130%), bring the BTC average price at the end of this halvening cycle to $88k... so the model is really not very far off, if we end up getting something like $88k - but even if it performs lower than that, we surely have to see how such performance ends up playing out before getting too upset about the model ... and even having problems in which we believe that there is some model that is actually in existence that would have come closer to being more accurate.

I do understand why you are less than excited about some of the ways that PlanB had been talking about his model, especially some of his arrogance in mid to late 2021, and then some of his seeming shifting of the narrative in late 2021.... and sure maybe he had been getting too caught up in absolute statements (which he is not completely innocent of that currently), so surely sometimes it does seem that he needs to take some of his emotions and some of his getting too caught up in specifics out of his model presentations and discussion of the model... in order to represent the model better.

[fillippone]

I believe that the S2F model has always said $100k as an average for the period.. but he mixed up his discussion of his "proprietary" floor model with his S2F model when getting into some of those specifics. .and I was never really any fan of getting into specifics..

I didn't have this understanding of the model, but it might be my fault on this. After all this is pretty reasonable looking at the graph, but he actually said first:"100K by December!"

As per the "Floor Model" that one is dead. PlanB himself admitted it failed and he won't use it never again.

I do understand why you are less than excited about some of the ways that PlanB had been talking about his model, especially some of his arrogance in mid to late 2021, and then some of his seeming shifting of the narrative in late 2021.... and sure maybe he had been getting too caught up in absolute statements (which he is not completely innocent of that currently), so surely sometimes it does seem that he needs to take some of his emotions and some of his getting too caught up in specifics out of his model presentations and discussion of the model... in order to represent the model better.

I completely relate to this and I agree 100%.

[fillippone]

Finally PlanB returns tweeting about Stock to Flow!



Coming back to an older version of his graph, that better adapt to this delayed pump!
Mixed feelings.

[naim027]

Finally PlanB returns tweeting about Stock to Flow!



Coming back to an older version of his graph, that better adapt to this delayed pump!
Mixed feelings.

This tweet was shared yesterday. PlanB just missed one day. He should tweet that post on May 3rd, 2022. We have always seen a smooth pump after halvings. He also wants to watch what Bitcoin does in the next two years. The following estimated halving time is May 3rd, 2024 (Exactly two years). Only 105,029 Blocks remain until halving. I am excited. I want to take a sleeping pill and wake up on 4th May 2024.

[tertius993]

Finally PlanB returns tweeting about Stock to Flow!



Coming back to an older version of his graph, that better adapt to this delayed pump!
Mixed feelings.

More moving of the goalposts.

[JayJuanGee]

Finally PlanB returns tweeting about Stock to Flow!



Coming back to an older version of his graph, that better adapt to this delayed pump!
Mixed feelings.

This tweet was shared yesterday. PlanB just missed one day. He should tweet that post on May 3rd, 2022. We have always seen a smooth pump after halvings. He also wants to watch what Bitcoin does in the next two years. The following estimated halving time is May 3rd, 2024 (Exactly two years). Only 105,029 Blocks remain until halving. I am excited. I want to take a sleeping pill and wake up on 4th May 2024.

I doubt that there is any reason to get overly anxious in terms of wanting the future to be rushed.

Seems to me that there are reasons to attempt to enjoy life as we go and the process as it goes.

I am not going to doubt that so many people get anxious in terms the NGU (number go up) technology to play out... yet not even that NGU technology is guaranteed.

Individuals vary so much, and frequently, I am not sure what our presumptions should be - except that if we are still in stages of accumulation than there should be some gratefulness that the price is staying down below expectations somewhat.  Maybe some guys believe that if the number just goes up, then they don't need as many coins, and in that case, they already have enough coins.  But is that really realistic to expect the BTC price to go up without any suffering along the way.

Some guys might just be inclined to suffer, and going to complain no matter what.  For example, "we only got a 3x to 6.5x and we have been stuck in the 3-5x territory for like forever.  I wanted moar!!!"

It's not good to have too many expectations, even though many of us likely realize that this bitcoin thingie is going quite well (even if it could have gone better) so far.

By the sure we "always have two years left" but depending upon what is being talked about. If there was a claim two years ago about the peak of the price likely happening at the end of 2021.. then there is a claim that 2 years has passed.  Now, there is a claim that there is a need to account for the average BTC price for the whole havening period, which ends up being two years from now.. but then there might be a question about did the peak happen or not.. No one is going to know, except to proclaim that the odds still remain pretty good that we still could get some kind of price peak that will bring our average price for the whole halvening period up to get closer to what either the old model or the new model predicts.  The old model said $100k.. so why back off of that unless you believe that the price has already spiked.. but then if the new model proclaims only an average of $55k, that will be easier to reach.




There gotta be some humor in some of this.



hahahahahaha - especially if we are talking about it could be model 1, or if not model 2, and if not model 3 might be o.k.. ; too...

By the way, the 100 week moving average is currently at $35k (which would be the average for the whole of this halvening so far), but if we take the average of the last 4 years, then we end up with the 200-week moving average which is currently at about $21,700, so can that average of the 200week moving average get up to $100k in the next to years, and if not the back up would be to say that we think that it may well only get up to $55k within the next two years.

In other words, PlanB's seeming flip flopping is not really helping matters... let's just continue to see what happens.. and actually I have no problem or gripe if the model ends up having an average that is either right on, underperforming expectations or overperforming expectations... .. directionally, both our 100-week moving average and our 200-week averages continue to move up... so everything seems to be working out fine, even if we cannot really know specifics with any kind of precision.. but what else is new?

More moving of the goalposts.

Sometimes I am not sure if those "moving of the goalposts" claims are fair - or maybe sometimes PlanB has some presentation issues.

There has always been a kind of range of expectation, so if the ultimate price ends up falling exactly within the range of expectation, then Plan B looks like a genius, and if he reframes the expectations to attempt to conform with data as it is playing out, he is accused of both not being sufficiently scientific and also to be maintain a kind of rolling model rather than sticking with his earlier claims.

[gagux123]

Hello everyone and fillipone!

I would translate this topic created by you on the portuguese board (but they were faster than me lol)

Anyway, i'm sending this message to congratulate you for this excellent topic you created to share your knowledge 

A few years ago, I was studying technical analysis and discovered two relevant "types of indicators" which are the Stock-to-Flow Model and "2 Year MA Multiplier"
I don't know if in fact these types of indicators are 100% assertive! But I believe there is a possibility that we can get a sense of how this works (generally speaking)

If anyone wants take a look:
Please don't negative me or criticize me, I'm just sharing this topic that I created because it might be useful for another user

best,
gagux123

Gráficos p/ analise técnica - Stock to Flow / 2 Year MA Multiplier

[fillippone]

At the moment the S2F model is having a few difficulties, and PlanB itself is finding new narratives to keep it alive.
Hopefully, we will be able to cross that S2F line again in the future!
(it's not a gamble, it' s a strategy)

[JayJuanGee]

At the moment the S2F model is having a few difficulties, and PlanB itself is finding new narratives to keep it alive.
Hopefully, we will be able to cross that S2F line again in the future!
(it's not a gamble, it' s a strategy)

Link or it did not happen.