You may think the Stock-to-Flow Model fell short, but it's still directionally right, and here's why
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
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/
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.
Brave man to risk the pitchforks!
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!
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?