ROAD TO WISDOM

A collection of the relevant research with respect to the stock to flow model

 

PLANB'S ARTICLE ON BITCOIN

PlanB wrote an article about how bitcoin's stock-to-flow is related to bitcoin's market cap and how the same relation between scarcity and price is seen with other commodities.
This piece drew much attention in the bitcoin community and it drove me to perform a model validation, to see if it was just hype or whether there was really something there.

 

FIRST MODEL VALIDATION OF S2F MODEL

In this piece I checked to which extent PlanB's model respected the basic assumptions of linear regression (the statistical modelling method used to create the model). The conclusion was that the model didn't respect the basic assumptions and therefore should considered as flawed. You will find out later that I was drawing my conclusion a bit too early.

 

BITCOIN PRICE COINTEGRATED?

Nick showed that he found that Stock-To-Flow and bitcoin market cap are cointegrated. This means that PlanB's model is not flawed, but that the coefficients are super consistent instead.

 

3 COINTEGRATION TESTS

After Nick showed he found bitcoin's marketcap and stock-to-flow are cointegrated, I had to verify myself. To make sure Nick wasn't cherrypicking data or tests, I used my own dataset and used three different tests to test for cointegration. All test results were positive. Cointegration was confirmed and PlanB's model was validated.

 

FURTHER RESEARCH

Further research will be shared here. I'm currently evaluating into what extent statistical concepts were rightfully applied, after the S2F model received some decent criticism from econometric heavyweights.

 

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