A little update today from PlanB on the same topic:


https://twitter.com/100trillionusd/status/1402213619354456065?s=21

Here is a link to the original image:


Blue bands are the S2F model bands: the price is expected to stay inside the blue bands for most of the time. The more it stays outside of that zone (i.e. beginning of 2019) the more likely a pullback is expected.

I do understand that if you observe that the BTC price is deviating a certain magnitude from a price prediction model, such as 50% below such model, and the deviation endures for a certain period of time, whether that is 3 months, 6 months, a year or longer, then likely the model need to be adjusted to take that long standing and relatively large deviation into account.

At the same time, I personally doubt that we should be giving too many shits about how far or how long that the BTC price might be deviating from such line (or expectations that are shown in the model), and any good model will just attempt to take that into account and to adjust accordingly.  Sure, one thing would be to conclude that the model is broken, and another thing would be to attempt to take into account of new facts (to the extent that they are sufficiently material and sustainable) to tweak the model. 

I give very little weight to any model having high degrees of certainty to future performance of something like BTC price dynamics which includes a variety of factors (including somewhat game theory plays of human behavior) that go beyond merely assessing historically how those various factors have affected BTC price... even while at the same time the stock to flow model does seem to contain a lot of extractability powers to show likely future performance by already had happened past happenings.

Of course, one question remains regarding how much deviation and for how long would be necessary in order to justify a BIG ASS tweakening of the model.. and even the worse case scenario of conceding that the whole model is broken.  Of course, Plan B does like to frequently and regularly plot new data points into the model in order that we are able to see how far we might be deviating from where the model says we should be and we should also be able to figure out long such deviation has been taken place - including attempting to assess whether such ongoing deviatening rises to a material and substantive level that justifies tweakening or completely reassessing the model in terms of maybe a shift in the line might become appropriate, at a certain point, and sure maybe there is some math that can be applied in terms of if the model is deviating for x quantity for y amount of time then a tweakening or rethinkening is justified. 

Any of us who attempt to appreciate the model can surely proclaim that it is the worst model out there, except for all the other models, and surely, I like to reduntantly describe the necessity to give weight to the four year fractal (which of course is already in the model), and considerations of how well is exponential s-curve adoption based on metcalfe principles and networking effects coming along - which is not contained in the model, but who cares, we can still assess the model in terms of thinking about those kinds of additional considerations.. and perhaps even saying that the model should be adjusted up or down because demand is higher or lower than we had thought--- blah blah blah... demand is not in the model, but still does not break the model to tweak it a bit, if necessary.. we do not seem to be close to being there.. but maybe I don't know... how long do you think that our staying 40-50% of the model or even going down from here and reaching higher levels of deviation would justify some kind of "oh sheeeiiittt, maybe we need a tweakening?"

Sure, the answer could get addressed, if the BTC price were to recover back into the upper $40ks and even into the lower $50ks, and we could proclaim, hey even though the price is still below where the model says it should be, at least we are not 40% to 50% where the model says we should be, so then the urgency of the need for a tweakening becomes less compelling to carry out.

Of course, I prefer UP to DOWN, so it would kind of suck to end up either having $64,895 serve as the high for this cycle resulting in a long period of down below what the model says that lasts for a year or longer, right where the model says we should be going UP, then we either go sideways or end up experiencing further correction that lasts well into the period where the model shows that we should be UP higher or going UP.  I personally still proclaim that it is a BIG so fucking what.  Don't get so goddamned attached to models predicting future performance and just try to plug those new facts into the model and see if some variation of it still works or could work.. in order to both account for facts.. and to give some kind of expectation of "where this thing might go." 

I know that I am rambling a bit, but I still think that we are going to need a pretty decently sized deviation from the model to take away our hopes and dreams of UPpity.... while at the same time, each of us better be taking these kinds of models with a large enough grain of salt in terms of both our financial and psychological expectations.

Im quite confused of what he meant with " weakness" in June and July but well some people ( tradingview ) are saying that we are going down in July probably below 30k. On top of that , he seems pretty confident with that tweet. He used the word 'my worst case scenario' instead of best case scenario so that show that he is confident with the price will not go anything lower than $47k on August , thats sick though.

So what would happen if somehow this S2F model breaks and we are not heading to anything higher than lets say, 50k this year or probably next year? Alot people seems to trust this S2F model alot though

If I'm reading the chart correctly, the answer would be no. As of today, there is a divergence between what the model predicts and the price on the downside, but in the past there was on the upside and the price returned to the median.

Another thing is whether we doubt that the model is correct or not, but as a model that explains quite reliably the behavior of the price as a function of supply, I do not think that the price today falsifies it.

I did a quickie glance at the comments from the tweet too, and sure if the dark blue is 1 standard deviation and then maybe the lighter blue is 2 standard deviations, I am thinking that the commenter is probably suggesting that there can be "up to" a certain amount of going outside the 1 standard deviation bond (which he stated as 33%) in order for the model to still be valid.  It seems a bit off to be proclaiming that there has to be deviation of 33%.. that is almost ridiculous if you think about the matter.

Surely when I do a quickie eyeballing of the chart, probably we are lucky to have even up to 10% of the price points to be outside of 1 standard deviation, and actually that seems like so far the model remains solid as fuck.. In other words, the less deviation the better, but some deviation is expected "up to a point" that is far from even close to being reached.

Even if we were approaching 33% of the data outside of 1 standard deviation, that might start to cause some justifications that there may be ways to tweak the model a wee bit to make it more in line with the data rather than proclaiming that the model is actually broken.. I am not even sure what kind of tweak might be reasonable without accusations of trying to conform the data to the theory.. but whatever, punchline still seems to remain that the amount of deviation that we have experienced to date is actually surprisingly low and perhaps even a deviation level for ants.   hahahahaha

While Stock to Flow is "suffering", Stock to Flow Cross Asset Model is still in play:



Bear in mind this model is inherently different from Stock to Flow: this model compares the ratio Stock to Flow ratios across several asset classes with each asset class market valuation, without taking time into consideration. Essentially, SXF takes a picture of the relative price of each Stock to Flow ratio: turns out you can buy Bitcoins, with his 56 Stock to Flow, cheaper than Gold, which has a similar S2F ratio of 60, but an order of magnitude bigger market valuation.

Well, I had a thought on this point and I think there is at least a couple of points to mention:

• The reference to CAPM, and in another interview to the Black&Scholes model, it is not meant to refer to their respective inventors winning the Nobel Prize, rather referring to the fact a class of models that don’t take demand in account does exist, and works, or worked, pretty well for a few decades. So, the lack of demand in the factors of the S2F model is not per se and indicator that the model is flawed
• S2F models, without taking on consideration the demand, has an explanatory power of the 95% of the variance of bit pin price. Hence, modelling demand into this, a really cumbersome task, would improve the model of only 5%, at a great complexity cost. Are you sure this is going to dramatically change the global picture? Take into account S2F has never been a trading model, only a “final state” model, providing long term predictions.

Hope this clarifies a little bit.
This is anyway my comprehension of the matter: happy to discuss if further.

According to this model, demand is not in the equation.
For you it is part of the equation, not for the model. For the model price is not the result of demand and supply, but ultimately only a function of S2F, or supply.


The model can be wrong for sustained amount of dollars, for sustained amount of times, but price will eventually hover around the model price in the long run, like a “dog on a leash” or “ drunk man walk”.

This is why you shouldn’t trade in this model, as it can stay wrong for bigger amounts of dollars or longer periods than you can remain solvent.

The price of an option on a stock has nothing to do with supply and demand. It relies on non-arbitrage condition that determine the unique price. Not saying this model relies on non-arbitrage hypothesis, but no, price is equal to match of supply and demand is not 1+1.


Model cannot micro-estimate or precisely track the bit on. Price, but if you want it to be right, in the long run price has to recover to model price. That’s it. Not too scientific.