PlanB’s S2F model is flawed

Anything is possible if you make enough predictions. Eventually, one of them will be correct, that's how you get labelled an "expert."

PlanB’s S2F model is flawed
PlanB’s S2F model is flawed

Key takeaways

  • PlanB’s S2F model predicted that Bitcoin’s price would pass 100k this year
  • Jonathan Zeppettini pointed out that the S2F model is not accurate and has been proven to be flawed.
  • He added that Bitcoin’s price is affected by interest rates.

Interest rates affect Bitcoin’s price

Bitcoin reached an all-time high price of $69k in November 2021. Since then, the world’s leading cryptocurrency has lost more than 65% of its value and is now trading just above $23k per coin.

Despite the current market conditions, PlanB’s S2F model predicted that Bitcoin’s price would pass 100k this year. However, Decred’s Jonathan Zeppettini believes that the model is flawed and its prediction is not accurate.

In a recent interview, Zeppettini commented that;

“The S2F model has been thoroughly discredited and is completely useless. If Bitcoin becomes predictable, it will be because it has matured, grown immensely, and its volatility has declined significantly, at that point, you could then expect it to perform similarly to commodities such as gold or silver, which rarely see large moves unless there are significant macro events that act as catalysts.”

The Decred Strategy Lead added that a good metric for determining Bitcoin’s price is interest rates. The interest rates set by the United States Federal Reserve has affected Bitcoin’s price performance in recent months. He said;

“Bitcoin is still a speculative asset and is impacted by the price of money as well as confidence in the fiat system as a whole. Futures and other derivatives, in theory, are useful tools for price discovery. However, when they're cash settled as opposed to physically settled (with actual Bitcoin), there is an opportunity for those markets to distort reality.”

VanEck has a more realistic target for Bitcoin as it predicted the cryptocurrency would reach $30,000 in the second half of the year. Zeppettini commented that;

“Anything is possible if you make enough predictions. Eventually, one of them will be correct, that's how you get labelled an "expert."

Analysts at banking giant Standard Chartered have warned the bitcoin price could fall as low as $5,000 in 2023. If that happens, Zeppettini said the market could see the exit of many overleveraged players, similar to what is happening in the current bear market. He stated that;

“We're still going through a massive deleveraging in several asset classes, including stocks, real estate, and crypto. There has been a wave of centralized cryptocurrency businesses that have defrauded investors, taken on huge amounts of leverage using worthless collateral, and sustained staggering losses.
This has shaken confidence, especially among those who aren't knowledgeable enough to understand the nuances between trustless assets like Bitcoin, and centralized entities that facilitate the acquisition of those assets or speculate on them.”

While many in the industry believe that Bitcoin has reached its bottom, a further decline could affect several businesses. Zeppettini said;

“If you were to see such a sharp decline in the price of Bitcoin, it would likely trigger another round of failures among overleveraged players, from hedge funds and VCs to mining firms and other service providers. This causes cascading declines as one firm liquidating assets leads to lower prices which causes the next firm to hit a similar trigger point. Eventually, all the bad debt will be liquidated, and the market can begin to heal. For now, many market participants are waiting on the sidelines for the dust to settle. Plenty of people want to believe that the worst is behind us, however it's best never to try and catch a falling knife.”

At the start of the year, Bitcoin was trading at $16,585 per coin. The coin is now up by nearly 40% year-to-date and is trading above $23,000 per coin.