Bitcoin Analyst Raises Doubts About Practicality Of S2F And Power Law Models: 'They Both Will Break'

Popular on-chain analyst Willy Woo raised concerns about the practical applicability of Bitcoin BTC/USD price prediction models like Stock to Flow and Power Law, adding that they will “break” at some point.

What Happened: Woo lent support to Bitcoin researcher Joe Burnett's opinion that both models will fail.

"Power law is a curve fit which so far has worked because we are in a smooth exponential part of the adoption-s curve, once we approach inflection it breaks," Woo argued.

They both will break based on first principles.

Power law is a curve fit which so far has worked because we are in a smooth exponential part of the adoption-s curve, once we approach inflection it breaks.

S2F predicts an infinite value once all BTC is mined. I mean this…

— Willy Woo (@woonomic) July 9, 2024

Regarding the S2F model, Woo said the predicted infinite value of Bitcoin would happen in a scenario where the U.S. Dollar loses value and goes to zero.

However, in reality, big investments would take time, and consequently, the model will lag. "So not necessarily broken yet, just slow," the analyst remarked. 

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Why It Matters: The two price models in question are the S2F model and the Power Law model. 

Created by pseudonymous X user, Plan B, the S2F is a supply-side analysis that attempts to quantify the relationship between the relative scarcity of Bitcoin with its price. As Bitcoin's supply in the market decreases, the price is predicted to increase in the long term. 

According to S2F, Bitcoin is anticipated to reach $195,000 by the end of 2024. However, the King Crypto severely fell short of predictions during the 2022-23 bear market.

The Power Law model, on the other hand, represents the correlation between Bitcoin's price and time.

Created by Giovanni Santasi, the power law model presents a graph showcasing Bitcoin's current price, a support level below which Bitcoin typically doesn't fall, a linear line, and a resistance level above which Bitcoin doesn't rise. 

According to the model, Bitcoin will reach $100,000 no earlier than 2021 and no later than 2028. 

Price Action: At the time of writing, Bitcoin was exchanging hands at $57,558.86, up 1.35% in the last 24 hours, according to data from Benzinga Pro.

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