1/15 Today, I'm comparing the two currently most popular bitcoin price models: Rainbow chart vs S2F!

Rainbow chart:
Tried & tested log regression (2014)
Never changed
Has emoji

S2F:
New & complex (2019)
Changes often
Sounds like a sex position

A thread

2/15 Origin story:

The Rainbow chart was invented by the well-known Redditor /u/azop who posted these charts for years for no personal gain on /r/BitcoinMarkets.

@100trillionUSD (S2F) is a pretty cool guy, but Azop is a real OG (posting these graphs since 2014).

3/15 Theory:

The S2F model posits that small variances in the emission rate can dictate the BTC price, when really it's set by supply/demand. Demand is the much more volatile factor & more likely to influence price, but S2F does not model it. The Rainbow chart has no such issue.

4/15 To support S2F, @100trillionUSD fitted an OLS regression on ln(S2F) <> ln(mcap). Why he log-transformed both variables is unclear, but it's a good trick for simulating linear relationships. For the Rainbow model OTOH, the regression is *inherent*. https://stats.stackexchange.com/questions/127121/do-logs-modify-the-correlation-between-two-variables

5/15 Throughout most of the S2F model's lifetime, @100trillionUSD has leaned on statistical research from @btconometrics. Nowadays, @btconometrics refutes this OLS model (he says it is incapable of identifying a non-spurious correlation, and autocorrelation makes it broken).

6/15 For those who have been following along with the S2F saga, you've probably heard that the S2F and price are "cointegrated". Don't worry if you've never heard this term before, almost no one has (and almost no one understands it). Not even this guy, @yudapearl.

7/15 Remember, cointegration is a cornerstone to the S2F model. But it turns out it's not a very easy concept to deal with, as @btconometrics (the ~only one who understands it) has himself abandoned his original method he used for proving cointegration back in August.

8/15 @btconometrics still believes that the there is cointegration between ln(price) and ln(S2F), but make no mistake: throughout this whole saga (August 2019 until now) when S2F sailed to the top among bitcoin price models, it did so based on math the author now finds invalid.

9/15 This should make it clear to you on just how shaky ground the S2F model rests. If you consider that it required that the author himself disproved his own math 7 months later (and no one else did it in that time), you should understand how little scrutiny S2F really is under.

10/15 @btconometrics now has a new price model he uses (based on ARDL). The mid-2021 price prediction has been downgraded from $80k to $30k as a result. @100trillionUSD appears to be sticking to the allegedly autocorrelated (broken) OLS model though.

11/15 And it's always been a bit fuzzy (up to preference) what the S2F model actually is, there is no canonical version. The most recent one (3) describes the BTC price model as 0.08*S2F^3.5, but we've also seen 0.4*SF^3 and 0.16*SF^3.36. https://twitter.com/100trillionUSD/status/1212385816036687872

12/15 And the BTC price model of S2F is not the only aspect of S2F that jumps around a lot. The different S2F values also jump around a lot.

13/15 This is why you should come back to #TeamRainbow. The Rainbow chart doesn't rely on elaborate concepts that don't make sense (one-sided supply/demand narratives), fickle values or arcane math. It doesn't delude you into thinking it or you are smarter than you are.

14/15 The Rainbow chart just is. It takes the simplest approach: it's just a trajectory that the bitcoin price seemingly follows. But it still achieves the most important thing; it makes you believe. And it does so, but without the bullshit. https://twitter.com/TruthRaiderHQ/status/1250075744430153731

15/15 Deep inside yourself you know it's true. No one can predict the future. There is no single parameter that alone can shepherd the price of bitcoin. But we can all still believe. And what better way to dream of riches than with a rainbow? #BTC + =

#TeamRainbow

FWIW, I don't know any good traders who believe in the S2F model, but I came across this:

@AngeloBTC is possibly the best bitcoin trader of all time
and he never once tweeted about S2F. Actually he rarely ever tweets. But Angelo knows what's up. @AngeloBTC is #TeamRainbow