Bitcoin's Price vs. Time: Why the Power Law Is Wrong
Bitcoin's supply is knowable. Bitcoin's price is not. Every price model that forgets the difference eventually breaks, and it takes your conviction with it.Cory Klippsten on PlanB, stock-to-flow, the Bitcoin power law explained without the scientism, and why elapsed time is not a theory of price formation. This is Bitcoin analysis about the limits of Bitcoin analysis.
A new bull market means no shortage of people willing to sell you price targets, charts, cycles and increasingly science-y models. Before you trade on any of them, understand why you own Bitcoin in the first place. Don't outsource your conviction to somebody else's price model, because when the model breaks, your conviction breaks with it.
He walks through a century of economists trying to make economics look like physics, from Long-Term Capital Management in 1998 to the subprime models of 2008, by way of Hayek's pretence of knowledge, then applies the same test to every Bitcoin price prediction fitted to a chart.
Covered in this video:
Why a knowable supply does not make the price knowable.
Why the power law trend line is stock-to-flow with the scarcity costume removed, and why elapsed time is the x-axis rather than a cause.
How wide the power law corridor actually is, and what a 16-fold range from $35,000 to $560,000 does to the word "prediction".
Why the original S2F stock-to-flow model was statistically invalid from the beginning.
The nonsense model he asked BTconometrics to build, made from the number of days between two arbitrary dates in Bitcoin history, which beat stock-to-flow statistically.
Where a power law extrapolation genuinely does outperform other forecasting models, and why that still does not make it a prediction.
What Swan's own Bitcoin forecasting research concluded about its own forecasts.
Chapters:
0:00 The warning before the bull market
1:00 When sophisticated math fails: LTCM and 2008
3:00 What Bitcoin's math actually tells you
3:16 PlanB and the stock-to-flow model
4:32 Proving it with a nonsense variable
5:23 The power law trend line, the same trick without the costume
6:15 Why extrapolation is not prediction
9:22 What Swan's own forecasting research found
11:05 Be bullish for the right reasons Receive SMS online on sms24.me
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