SLP171 PlanB & Saifedean Ammous – Bitcoin S2FX, S2F, and Evolution From Collectible to Financial Asset
May 5, 2020
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Bitcoin experts PlanB and Saifedean discuss Bitcoin's transition from a collectible to a financial asset, including debates on stock-to-flow modeling, phase transitions, and societal implications. They explore the precision of forecasting market behavior, Bitcoin's evolution as an institutional-grade asset, and the importance of cointegration in price analysis.
Integration of Stock to Flow cross asset model offers new perspective on Bitcoin valuation.
The Stock to Flow model's adaptability and persistence through different phases underscore its value.
Debates on Bitcoin models and scientific discussions indicate evolving modeling strategies.
Consideration of exogenous variables like currency devaluation enhances Bitcoin valuation model robustness.
Deep dives
Overview of Stock to Flow Cross Asset Model
The podcast episode discusses the Stock to Flow cross asset model introduced by Plan B and Safedine. The model integrates two formulas to provide a new perspective on Bitcoin valuation. Plan B explains the significance of merging two formulas and introducing a new way of thinking about Bitcoin valuation, emphasizing the need for different perspectives on the same data.
Transition Phases and Model Persistence
The discussion delves into the concept of transition phases within the Stock to Flow model. Plan B highlights the persistence and adaptability of the model over time, acknowledging how different phases and clusters are observed in the data. The model's ability to adjust and continue to provide valuable insight is emphasized despite potential critiques.
Critique and Evolution of Bitcoin Models
Critiques and debates surrounding various Bitcoin models, including comparison to older models like the rainbow chart, are addressed. The evolution of modeling strategies and ongoing scientific discussions on Twitter are highlighted as opportunities for scientific debate and advancement in understanding Bitcoin valuation. The podcast reflects on the dynamic nature of modeling and the scientific process.
Impact of Fiat Currency and Inflation Considerations
The impact of fiat currency devaluation and inflation on Bitcoin valuation models is explored. Plan B and Safedine discuss how the model may evolve in response to changes in currency value over time, emphasizing the need to consider the long-term effects of inflation on Bitcoin's value. The potential for adjustments in the model based on macroeconomic factors like currency devaluation is considered.
Validation of Exogenous Variables in Model
The podcast highlights the significance of validating exogenous variables in Bitcoin valuation models. Discussions focus on how factors like the Satoshi schedule and Stock to Flow ratio can serve as independent variables in forecasting Bitcoin prices, providing insights into the causal relationships in the model. Safedine underscores the importance of leveraging exogenous variables to enhance the model's predictive power and robustness.
Bitcoin Modeling Accuracy Over Time
Bitcoin's price accuracy is viewed as exceptional when considering its trajectory over the past and next 10 years, showing a range from 0.3 cents to $1 million. This long-term perspective highlights the precision despite short-term fluctuations, positioning the model as highly reliable even with room for error.
Implications of the Stock-to-Flow Model and Bitcoin's Challenge to Economics
The stock-to-flow model's potential to predict Bitcoin's value challenges traditional economic theories, particularly Austrian economics. Safedean highlights the rarity of a mathematical model accurately forecasting human actions and the implications of Bitcoin's fixed supply disrupting traditional investment perceptions, showcasing a unique challenge to economic ideologies.
PlanB (pseudonymous Bitcoin quant) & Saifedean (Bitcoin economist) rejoin me to talk about PlanB’s latest work on S2FX, and some of the debates being had on S2F modelling as well as addressing some of the criticism. We will also talk about Bitcoin as it goes through phase transitions, and the implications on the Bitcoin industry, and the rest of society.
