Great piece, love the more realistic take on near term price movements but bullish on the long term. New innovations always have long lead/lag times - electricity took 30 years to be fully utilized and become widespread. The internet was much quicker, but it's still wreaking change in the real economy. Much better to think about Bitcoin in decades, not months or even years
Thank you, Tom! And yes, the best way to view Bitcoin is with a very zoomed-out view. The trend becomes much clearer, and the pace at which this asset is disrupting the world of value too.
Come on, stock to flow was always ridiculous as a model from a practical, let's-actually-use-this-thing-to-make-money standpoint. Bitcoin should be between 20,000 and 200,000 in x number of years. Great. Thanks for that.
Sure, there were a few great insights about scarcity and valuation, but it all just comes down to relative gearing against planned, systematic dollar depreciation.
If there is a bitcoin model, it would have to be 1) gearing to fiat depreciation -- liquidity creation, monetary inflation -- combined with 2) asset allocation into bitcoin from other assets, as you've cataloged so well.
Those would be your 2 variables. Right now bitcoin is something like 90% correlated with liquidity creation and destruction. So that's the real "flow" -- liquidity flow, mostly from Fed and PBoC.
Thank you for summarizing the valid criticisms of the model. I largely agree! The S2F Model with its specific numbers is not particularly helpful as a trading model because of its wide range of numbers, and the statistical issues with the specific numbers.
But you're right, there's something helpful in the insight about scarcity and valuation. The real-world link to commodities as SoV assets and how higher stock-to-flow commodities seem to end up storing exponentially more capital.
What to make of it? Perhaps its a process of finding what's valuable about the increasing scarcity idea and tossing out the rest.
I love Bitcoin. Not a fan of some of the toxicity.
Not sure if there's been some offline back and forths discussing or critiquing each other's ideas around this but I think these public venomous attacks are unwarranted and really damaging in general. If there's was offline conversations prior it would be good to acknowledge them in these public critiques (which appear much like attacks).
I definitely have lost some respect for the Swan team based on this. Which is sad since they are doing so much great work. Hopefully there's some nuance I've missed.
Was not a fan of PlanB and S2F but have appreciated your "directionally correct" take on it. It's far more balanced.
Keep doing the great work Jesse. Happy subscriber and follower (and name-saker) Would love to know if there's been some offline conversations re this topic prior to the venomous and condescending public attacks. It would provide more clarity on approaching and factoring info from each party implicated.
Thanks for the reply, Jesse! Appreciate the support and encouragement!
In terms of offline conversations, there haven't really been any. In 2020, I wrote some articles for Swan - they wanted me to write a takedown of S2F but I wasn't interested (since I am obviously a fan of the spirit of that idea).
Beyond that, I can only speculate as to reasons for the venom. It has been surprising to me as well, and I can't help but share your general sentiment on the matter. Quite a few people have reached out to me privately with similar reactions.
Something I love about the way you write is that you not only list the reasons why something is happening, you also get into the weeds about it and unpack it in detail. You delve and explain it in easy to understand terms, enriching the knowledge of all your readers. Props!
Thank you, Chryss! That is a high compliment - a writer's compliment. I appreciate it very much. Will do my best to keep that same style going forward!
I'm really glad you wrote this article (because I was considering doing it myself, ha), and I'm a big fan of your previous work as well.
Last cycle I coded my own version of Plan B's S2F model, which I believe makes some sensible (and logically justifiable) improvements on the original parameterization. My version hasn't "failed" yet - it predicted an average price of ~$43K for the 2020 cycle. I'd be very interested to share it with you and to get your thoughts. What's the best way to do that?
Great piece, love the more realistic take on near term price movements but bullish on the long term. New innovations always have long lead/lag times - electricity took 30 years to be fully utilized and become widespread. The internet was much quicker, but it's still wreaking change in the real economy. Much better to think about Bitcoin in decades, not months or even years
Thank you, Tom! And yes, the best way to view Bitcoin is with a very zoomed-out view. The trend becomes much clearer, and the pace at which this asset is disrupting the world of value too.
Come on, stock to flow was always ridiculous as a model from a practical, let's-actually-use-this-thing-to-make-money standpoint. Bitcoin should be between 20,000 and 200,000 in x number of years. Great. Thanks for that.
Sure, there were a few great insights about scarcity and valuation, but it all just comes down to relative gearing against planned, systematic dollar depreciation.
If there is a bitcoin model, it would have to be 1) gearing to fiat depreciation -- liquidity creation, monetary inflation -- combined with 2) asset allocation into bitcoin from other assets, as you've cataloged so well.
Those would be your 2 variables. Right now bitcoin is something like 90% correlated with liquidity creation and destruction. So that's the real "flow" -- liquidity flow, mostly from Fed and PBoC.
Not hard to see the correlation with liquidity, it's nearly exact: https://www.tradingview.com/x/rsVtX4rT/
Thank you for summarizing the valid criticisms of the model. I largely agree! The S2F Model with its specific numbers is not particularly helpful as a trading model because of its wide range of numbers, and the statistical issues with the specific numbers.
But you're right, there's something helpful in the insight about scarcity and valuation. The real-world link to commodities as SoV assets and how higher stock-to-flow commodities seem to end up storing exponentially more capital.
What to make of it? Perhaps its a process of finding what's valuable about the increasing scarcity idea and tossing out the rest.
I love Bitcoin. Not a fan of some of the toxicity.
Not sure if there's been some offline back and forths discussing or critiquing each other's ideas around this but I think these public venomous attacks are unwarranted and really damaging in general. If there's was offline conversations prior it would be good to acknowledge them in these public critiques (which appear much like attacks).
I definitely have lost some respect for the Swan team based on this. Which is sad since they are doing so much great work. Hopefully there's some nuance I've missed.
Was not a fan of PlanB and S2F but have appreciated your "directionally correct" take on it. It's far more balanced.
Keep doing the great work Jesse. Happy subscriber and follower (and name-saker) Would love to know if there's been some offline conversations re this topic prior to the venomous and condescending public attacks. It would provide more clarity on approaching and factoring info from each party implicated.
Thanks for the reply, Jesse! Appreciate the support and encouragement!
In terms of offline conversations, there haven't really been any. In 2020, I wrote some articles for Swan - they wanted me to write a takedown of S2F but I wasn't interested (since I am obviously a fan of the spirit of that idea).
Beyond that, I can only speculate as to reasons for the venom. It has been surprising to me as well, and I can't help but share your general sentiment on the matter. Quite a few people have reached out to me privately with similar reactions.
Brave man to risk the pitchforks!
Been dodging them all week now! Time to write my next piece :)
Something I love about the way you write is that you not only list the reasons why something is happening, you also get into the weeds about it and unpack it in detail. You delve and explain it in easy to understand terms, enriching the knowledge of all your readers. Props!
Thank you, Chryss! That is a high compliment - a writer's compliment. I appreciate it very much. Will do my best to keep that same style going forward!
I'm really glad you wrote this article (because I was considering doing it myself, ha), and I'm a big fan of your previous work as well.
Last cycle I coded my own version of Plan B's S2F model, which I believe makes some sensible (and logically justifiable) improvements on the original parameterization. My version hasn't "failed" yet - it predicted an average price of ~$43K for the 2020 cycle. I'd be very interested to share it with you and to get your thoughts. What's the best way to do that?