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November 25, 2020

Crypto RFQ

Why the Bitcoin Stock-to-Flow Model Is Flawed With Strix Leviathan

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Popular cryptocurrency trader “Plan B” on Twitter is behind the controversial Bitcoin stock to flow model that took the crypto community by storm. (3:40) Traders jumped on it, enamored with the prediction for another BTC bullish run.

Strix Leviathan CEO Jesse Proudman, however, says not so fast. (4:07) While he and his team are big believers in the need for fundamental valuation models in the cryptocurrency space given the speculative nature of the market, the stock-to-flow formula is not all it’s cracked up to be. According to Proudman, not only is the theory behind the stock-to-flow model flawed but the math is invalid. (4:30)

For example, the stock to flow model projects Bitcoin to be $100,000 in 2020 and more than $245 billion per coin as the model unfolds in the coming decades.

(4:55) “It’s a marketing model more than anything else in our eyes. And it’s disingenuous — it attracts people to invest in this space for the wrong reasons. We believe this is an interesting asset class. We believe the price will go up over time. But we want people to invest for the right reasons, not because they’re following a model that’s blindly not theoretically valid,” said Proudman.

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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