Will we one day be entitled to flawless forecasts of the evolution of the price of an asset, of a cryptocurrency? Researchers scrutinize the use of Stock-to-Flow in developing market price forecasts Bitcoin (BTC).
Is $ 100,000 a smoke screen?
The twittosphere comes alive when PlanB publishes new price forecasts for BTC or updates to old ones, based on the Stock-to-Flow.
A Bitcoin to 100,000 USD according to the S2F, that’s all well and good, but you still have to be sure that the model used to develop such a forecast is sufficiently reliable.
In a research paper, the ByteTree points to the weaknesses in the use of S2F to predict the evolution of the price of BTC.
Its co-founder, Charlie Morris, points out that certain hypotheses of S2F applied to Bitcoin are wrong.
The very optimistic price forecasts of analysts are based on the gradual decrease in its flow or inflation while, the stock-flow ratio gradually increases.
The model S2F emphasizes the flow and newly created tokens, while anyone with Bitcoins can potentially sell them.
Morris estimates that the price of Bitcoin is dictated by an economy of demand since its supply is fixed.
The network dynamics now depends on the stock and the flow is therefore not a determining factor in the evolution of the price of BTC.
Bitcoin: a technological reserve
Morris also suggests that the model does not take into account the decrease in the importance of minors on the network : miners previously benefited from a portion of income estimated at 50% of market capitalization, but this ratio is currently estimated at 1.7%.
Although miners continue to play an important role on the network, their economic footprint is shrinking.
Another criticism of S2F is that it does not take into consideration the actual use and adoption of Bitcoin, which nevertheless represents its intrinsic value: for Morris, Bitcoin constitutes a kind of technological reserve with high security and growing fields of application.
Should we give up all hope of a 6-digit BTC ? The criticisms are about how to use the S2F to forecast the price of Bitcoin and not on the value and potential of the latter itself. In any case, we will always need a provisional reference price: it’s worth what it’s worth, but it allows you to set a course.