Bitcoin Stock-to-Flow Model Still on Track Despite Big Bets Against it
Bitcoin re-tapped its highest price since January 2018 a few hours ago as it came within a whisker of $16,000. For the second time this month, that price level proved to be too much resistance and the asset has fallen back to $15,750 at the time of writing.
The bullish momentum over the past month has kept Bitcoin well within the parameters of analyst ‘PlanB’s’ stock-to-flow model.
Stock-to-Flow on Target
The stock-to-flow (S2F) model was initially published in March 2019, delving into the relationship between the production of supply and the current stock available, essentially calculating Bitcoin’s value through scarcity.
It has mapped Bitcoin’s price with a high degree of accuracy following three halving events now. The 2020 halving year is playing out the same way as 2012 and 2016 so far with a large run predicted for 2021 if history rhymes.
Chart update of the #bitcoin S2F (time series only) model. Price dots moving nicely towards model line. S2F multiple (white dots) rising. pic.twitter.com/SyhzutmOHc
— PlanB (@100trillionUSD) November 11, 2020
If the pattern plays out again, Bitcoin prices could be in six-figure territory by the end of 2021. Earlier this week, the analyst confirmed his stance backing the model and his lofty price prediction.
“People ask if I still believe in my model. To be clear: I have no doubt whatsoever that bitcoin S2FX is correct and bitcoin will tap $100K-288K before Dec 2021. In fact I have new data that confirms the supply shortage is real. IMO 2021 will be spectacular.”
Enter the Doubters
Chief investment officer of crypto hedge fund Arcane Assets, Eric Wall, is not convinced. So much so that he is willing to wager a million dollars that the Bitcoin price model will be ‘broken’ within five years not even reaching 50% of its target.
Not uncertain? I bet $1,000,000 that the S2FX model will be broken less than 5 years from now.
This is not a joke. I’m willing to lock up the money for it with a 3rd party we both trust, and you must too.
I define “broken” = “it won’t have reached even 50% of its target range”. https://t.co/vmDO5UkQoO
— Eric Wall (@ercwl) November 11, 2020
CIO at BlockTower Capital, Ari Paul, also wanted in on the action stating that he would give 3:1 odds on the same bet against the model. His reasoning was a little self-serving, however, suggesting that shorting model would make a good arbitrage opportunity netting him the returns.
“I can’t speak to Eric’s logic on this, but the reason I’m willing to offer this bet without even having to think about S2FX accuracy at all, is that it’s a simple arbitrage. Buy BTC, short S2FX at 3:1, impossible to lose.”
At the moment both doubters are betting against something that is still on track and has been accurate in the past. The majority of analysts and industry observers foresee more gains ahead for Bitcoin both this year and next.
