Topic: Stock-to-Flow Model: Modeling Bitcoin's Value with Scarcity - page 10. (Read 5726 times)

Gold is quite likely to suffer silver's fate in terms of reverting to its industrial use and industrial value the more that bitcoin supplants gold in terms of a safe haven asset and increasing financialization of bitcoin, and surely bitcoin is better than gold, anyhow in a variety of ways.. People have merely not come around to realize that bitcoin is better than gold yet..,. but they will.. they will .. and some people are already coming around to that realization.... and especially people who have been studying the bitcoin space, which you should be one of those folks, deisik.  You have been around bitcoin (at least your forum registration seems to show it) longer than me, but you still don't seem to fucking understand what is bitcoin?  Crazy that.  Some people take time, right?


In essence, you should realize by now that bitcoin is better than gold in terms of its scarcity, portability, verifiability, divisibility, programability, lack of a need to endure as much third-party risk or costs and likely other characteristics, too.


Likely, because of its physicality, gold has remained somewhat easy to manipulate with the passage of time.  I would not be negating that bitcoin has done decently well in maintaining decent value with the passage of time, even though it has been manipulated through its history.


I already covered that point above.


 It does not need to feel like bitcoin is any kind of killer currently.  Don't get so anxious.  Bitcoin is very early in its level of maturity and adoption, so you can choose to bet on it, or you can sit on the fence or you can bet against it.  The choice is yours.  Just don't come whining 4-10 years later when you cannot even afford .1BTC because you failed/refused to invest while it is still relatively cheap.


Of course, you do not need to transact much with bitcoin either, especially if there are a lot of inferior stores of value that you can use for your payment processors, but sure, there are likely going to develop more and more payment mechanisms with bitcoin too, even though perhaps it may not end up getting used a lot for small transactions if there are other payment mechanisms that are available.

On the other hand, there may be some people and some situations in which it might be way better to use bitcoin rather than some other mechanism that  either relies on a third party or there might be some other questions regarding the real time transfer of value or the ability to reverse the transaction, let's say for example there is an oil tanker that has $100million in value, and it might be better to transact in bitcoin for such a seller to feel comfortable about making sure that the value of the bitcoin is received before delivering such oil to the buyer. 

Of course, there can be a lot of other examples in which bitcoin might be the better vehicle for the transfer of value, but just using the oil tanker as one possible example.

As much as I would love that to come true, it's highly unlikely
 

So why did it not start with gold?

I mean, long before Bitcoin? Gold is also scarce and has been scarce since day one (apart from two events in the very remote past when it wasn't), so it should have done the trick long ago. Why didn't gold strip other assets off of their store of value functions? If we proceed from the assumption that it didn't, what is it in Bitcoin which gold lacks? Yeah, you can transact with Bitcoin but somehow it doesn't feel like its killer feature that would make it reign supreme among other such assets. You don't need to transact (much) with a store of value (as the term itself suggests)

PlanB is slowly expanding his Cross Asset model:




https://twitter.com/100trillionUSD/status/1263118694579920899?s=20

So, many Store of Value aligning on the "magical" regression.

I guess that as Bitcoin moves up the line, becoming more and more scarce and with his valuation going up, more and more of those assets will lose their place on that line, as Bitcoin will eventually "drain" from those assets their "Store of Value" functions, leaving them only with their "industrial value".
It happened with Silver, it will happen with Gold and any other Store of Value Assets.

Yes, as per my understanding, those are net buys.
I included in the Google Spreadsheet the link for financial statement for Greyscale (still working on Cash App ones), where youwe can doublecheck this information.
Don't trust, verify.

Of course the idea those buys are satisfied by newly minted coins rather that the existing coins is rater naive.
There are more than 18,000,000 BTC out there, so this  buying pressure is a tiny fraction of this supply.
But nevertheless, BTC whales will get eventually eroded by this pressure.
 

^ Nice fillippone. Are those Grayscale/CashApp numbers net buys?

I saw a very intrresting picture on Twitter.
That was a back-of.the envelope calculation i did many time here on BTC Talk (cit. needed), so I tought to make my onw version to share with you guys:




https://twitter.com/listedreserve/status/1258268244319694848?s=20

So, here it is my version to play with.

I am going to update it with reference of every price and numbers from reliable sources.


https://docs.google.com/spreadsheets/d/1weRaV1wuOM8XlsbvRGX7YkJ9-EbT2SuA_-x3irHRd-g/edit?usp=sharing

This is the biggest reason why S2F matters.

I may not have been summarizing the Stroukal arguments very well.  I just listened to it while I was doing some other things, and overall it sounded like Stroukal was making some decent arguments to me, until I listened to Guy Swann's various rebuttals.

One of the difficulties seems to be to assert that if you create a model that only emphasizes supply that demand is NOT also sufficiently embedded in the model by accounting for supply, such as holding demand constant or allowing for demand to be embedded in the historical data that is plotted on the line in order to create a trajectory based on where BTC prices had already been and where the prices had clustered.

So, even though demand might NOT be explicitly discussed within the model, it may be adequately accounted for by plotting the starting / historical prices which implies demand as a kind of constant (and perhaps within a range). just

Of course, stock to flow can be read as allowing for a lot of variance in where BTC price might go above and below the projected price points, and that tolerance for variance seems to allow for variance in the demand that may cause the price projections to deviate from where they might more likely thought to be on the model, too... so even though Stroukal's arguments presented the lack of demand within the model idea persuasively, I still question whether the model does not adequately account for demand by largely plotting empirical price data points and then kind of assuming a range of ongoing demand as a kind of constant or range and including that scarcity of supply likely motivates demand within a projected range of ongoing expectations that are reasonably predictive of future BTC prices, too.  


Great.  Let us know if you have some further insight regarding the topic.

I personally do not like to listen to the same thing more than once, unless there has been some considerable passage of time or I am feeling motivated to listen again for some other compelling reason.

Thanks for sharing! Listening now.

Is he serious?
If that were true Just tell me where demand (or supply) is considered in Dividend Discount Model for stocks, or Black&Scholes Model for derivatives

In Episode 392 of the Bitcoin Audible (rebranded from cryptoconomy), Guy Swann read Dominik Stroukal's critique of the stock to flow model, and really it seemed that Stroukal had made a really strong, persuasive argument critiquing the stock to flow model in terms of asserting that in economics, any model should account for both supply and demand, and proclaiming that the stock to flow model is pure speculation and wishful thinking because it ONLY focuses on supply.

More or less Guy Swann's rebuttal tears Stroukal a new asshole... hahahahaaha... What I am suggesting is that it is a good podcast, with both a good read of a provocative article and a great rebuttal, too.

Here it is:

Bitcoin Audible (previously the cryptoconomy): Read_392 - Economics of the Bitcoin Halving [Dominik Stroukal]

A really nice Webcast by Stephan Livera on Stock to Flow with Saifedean Ammous, author of the Bitcoin Standard and first proponent of Stock to Flow model in Bitcoin, and PlanB on his new Stock to Flow article, model development, haling and many more.





Definetly worth listening to.
I will try to extract the most interesting parts here.

A nice surprise:




https://twitter.com/100trillionusd/status/1255805636555739138?s=21

This is a Great interview.
A lot of information about the article and what is next.
Of course a few months have passed, so you have to put this in context, but the ideas are still there!

I totally get your point.
But i guess the original S2F model has already well demonstrated it is not a well articulated fit of a random data point, as it it cointegrated (this is a statistical test) and parameters are well stable over time (running S2F over different data sets, taken from different halving cycles for example, yields to almost identical parameters and price predictions).

A lot of your points have been actually been raised in the past and discussed in the above thread.
I think it is useful to approach the topic with a grain of salt and in a "challenging" way, as you are doing (we already have religion where you need faith to believe, models are different).
So I am happy to discuss your questions, as answering might me help me find the flaw in this model. I would like to find it, as I find disturbing to have a BTC valuation in the millions in a couple of halving....this means something (the USD) has to break to be true. Otherwise it is the BTC that is going to break.

The numbers don't tell anything by themselves

For instance, you can take an arbitrary set of random data and build a model (say, a polynomial function of high enough order) that would technically give you a 100% accuracy, at least as far as only the sample data points are considered. Then, on this account, you could go on to claim that the distribution is not random (following your logic here). But it would be a far cry from actually explaining anything in a meaningful way, let alone having any predictive power (the analogy of a random number generator seems appropriate here)

This is probably a borderline if not outright extreme example but it is still illustrative enough to show that numbers can be misleading as well as deceiving, and thus shouldn't be taken in isolation for drawing deductions and making inferences. You can arrive at very bizarre conclusions if you don't assess and keep in mind the nature of the subject matter. Put differently, statistical metrics are sufficient and unreservedly valid only in reference to truly random populations. With everything else, we should rather be concerned with looking for the underlying principles, forces, and causes, i.e. the actual mechanics of some phenomenon or process, and how things work internally

Mistaking correlation for causation has already become a cliché of sorts, but it is only a tip of the iceberg of the whole gamut of possible judgment errors we have to deal with and be aware of

That is the point.
It wasn't random, because there is a 95% R^2. This means 95% of the price is explained by this model. All the other factor are explaining 5%.
And this is not a spurious correlation (like high correlation between people drown in a pool and Nicholas Cage movies) because this model is also cointegrated. A fact that rejects this hypothesis.

Because prices were random in those years

So anyone who tries to describe the early Bitcoin history using anything other than pure statistics and its methods, which are descriptive on their own and say nothing about the driving forces behind the raw data, is actually trying to derive a meaning from, or relate a meaning to, something which is, or was, meaningless (as a process) due to its random nature. If you ask me, this is not a good idea as it casts doubts on the plausibility of the entire approach

In fact, I understand why people are doing this all the time (because they are looking for coherent explanations and plausible reasons for anything, even entirely random things), but any model, which is not statistical, either explicitly or implicitly, should separate the random part from the part which it tries to explain if it is to have any predictive power, i.e. an ability to generate verifiable predictions. But in case of early Bitcoin, there is simply nothing to winnow out

Why would they?
The model is co-integrated.
This means it is actually working, with those parameters, even if they are computed in such an early stage of bitcoin.
This means short terms fluctuations of BTC price around S2F model are possible, but statistically not significant.

No offense intended, by from my vantage point anyone who takes years prior to 2015 (not even speaking of 2010-2012) and says that their model works good on them too actually discredits the approach they are taking. In reference to Bitcoin, for early years one should use models and frameworks describing stochastic processes like random walk as Bitcoin's dynamic back in the day was completely chaotic and random

This is not to say that today's prices are not random for significant part, even though with more fundamental factors at play now

Third PlanB's article

Bitcoin Stock-to-Flow Cross Asset Model



Introduction:

Conclusion:


He basically use 2SF to interpolate between different asset classes.
In the first article he extrapolated bitcoin prices regarding time, here interpolate across asset classes using S2F.
Still have to think about it.

Get ready.




https://twitter.com/100trillionUSD/status/1254042161647099905