What do we think about S2F models?

[Cryptomint9]

Asking for discussion, and proving me wrong, here ...

 

Many here are probably familiar with the Bitcoin price predictions based on the stock to flow model theory. The basic idea is that the price of Bitcoin is mainly influenced by the supply cycle, assuming that demand more or less stays the same. So scarcity dictates the price range, rather than usefulness.

 

I must admit that I am one of the doubters, especially because I see the usefulness of Bitcoin (not Blockchain!) lagging. Apart from investing / speculating, their just aren't many uses for Bitcoin. For coins like XLM or XRP, you can argue that they are useful, because they actually support payments across systems and country  currency borders already. But Bitcoin transactions are slow, transaction fees are relatively high, and the fixed block size limits scalability.

 

So instead of the currency becoming scarcer with each halving, who guarantees that miners and users won't simply move away to more useful coins over time? S2F models applied to Bitcoin ignore the demand / adoption side, in my opinion, and that is a huge weakness. I think that everything depends on that demand side in the future, because Bitcoin doesn't live in a vacuum (both suppliers and consumers have multiple choices).

 

So what do you think? Are the S2F models advocates right? Or will the future value depend more on adoption than on the supply side? My current position is that S2F might have value as long as there is enough adoption, but that it puts way too much focus on the Bitcoin supply (and ignores the complexity of rising transaction fees).

 

As always, interested in your real opinion (and not just "interesting topic, I agree" 😉 )

 

Thanks!

[Wind_FURY]

Asking for discussion, and proving me wrong, here ...

 

Many here are probably familiar with the Bitcoin price predictions based on the stock to flow model theory. The basic idea is that the price of Bitcoin is mainly influenced by the supply cycle, assuming that demand more or less stays the same. So scarcity dictates the price range, rather than usefulness.

--Snip--

So instead of the currency becoming scarcer with each halving, who guarantees that miners and users won't simply move away to more useful coins over time? S2F models applied to Bitcoin ignore the demand / adoption side, in my opinion, and that is a huge weakness. I think that everything depends on that demand side in the future, because Bitcoin doesn't live in a vacuum (both suppliers and consumers have multiple choices).

So what do you think? Are the S2F models advocates right? Or will the future value depend more on adoption than on the supply side? My current position is that S2F might have value as long as there is enough adoption, but that it puts way too much focus on the Bitcoin supply (and ignores the complexity of rising transaction fees).

I believe that the markets are efficient, and that the price is supposed to be where it's currently now. That aside, I've posted against S2F before the halving, and said that everything is priced in, and that Bitcoin will NOT surge. I was wrong, and S2F is on schedule like clockwork.



It's a only forecasting MODEL, it can either be wrong, or right.

[pooya87]

The basic idea is that the price of Bitcoin is mainly influenced by the supply cycle, assuming that demand more or less stays the same. So scarcity dictates the price range, rather than usefulness.

This bold part is the problem with this theory, it is a wrong assumption. It can work for something like a popular stock, a precious metal, etc. These things aren't being adopted, their demand is more or less the same as it has ever been.
On the other hand bitcoin adoption (ie. demand) is increasing so the theory has to become a lot more complicated to account for that increasing demand.

I must admit that I am one of the doubters, especially because I see the usefulness of Bitcoin (not Blockchain!) lagging.

It is not "lagging". Bitcoin is one of a kind and in that sense is offering a very unique utility as a censorship resistant currency that could be used globally with highest security available while being very fast (your transaction reaches the entire world in matter of seconds and is settled on the ledger in 10 minutes on average).

You have to keep in mind that "usefulness" is not defined as creating vaporware such as what tokens are doing these days fooling people into thinking it is "usage"!

For coins like XLM or XRP, you can argue that they are useful, because they actually support payments across systems and country  currency borders already. But Bitcoin transactions are slow, transaction fees are relatively high, and the fixed block size limits scalability.

First of all when you compare two things you have to compare them correctly. For example a useless blockchain that nobody uses will obviously process 100 tx/day easier than a useful blockchain that handles 300k-500k tx/day. Secondly speed is not about how fast a tx goes into a block, it is about security that the said block offers. 1 confirmation in bitcoin that takes 10 minutes on average has a security that is leaps ahead of 100 confirmation in an altcoin's chain.
Finally it is about centralized versus decentralized. Both shitcoins that you named here are fully centralized and are in control of the company that has created them. Exactly like PayPal so if you want to compare these two you must compare them with PayPal and Visa not with bitcoin.

So instead of the currency becoming scarcer with each halving, who guarantees that miners and users won't simply move away to more useful coins over time?

Users don't care about circulating supply if something is indeed useful. I promise you that if some day an actually useful alternative cryptocurrency came along we would all be using it regardless of its price and supply.

(both suppliers and consumers have multiple choices).

Sadly we only have one choice when we are choosing in category of secure decentralized currencies.
If we were looking in the category of centralized pump and dump coins with potential of big profit in short term then we have about 20k-50k choices.

[jackg]

Bitcoin hasn't seen much adoption yet though. It's still a fairly new thing.

The competition makes bitcoin valuable and it's name - a lot of people know what it is and just haven't invested, what if some of them take a punt when the charts look like they're going up?

Xrp used to have two chains and they seemed to be putting more effort in the one they were selling off the banks and left the other where it was for a while at least... Most banks who started using xrp had declared they've moved to eth too.


Ultimately the currency with the best features, the best security and the best community will win. We just have to wait to find out who that is... it'll become obvious to people in the crypto space long before it becomes obvious to the public imo.

[hatshepsut93]

No asset can rise infinitely, or even just for long periods of time, and stock to flow model does not tell us when it will stop, in fact it tells that every halving is as important as the previous ones, while actually we'll have such low reward in just few decades that it will stop being a major factor for the price.

There's is a good connection between bull markets and halvenings so far, but maybe some other model that takes it into account could make a better long-term prediction than S2F.