As pointed out, there is likely also a correlation between amount of addresses and velocity. Or rather between the slope of amount of addresses and velocity.
More addresses being used and created indicates more different people use it (adoption) and that the same existing people use it more frequently (adoption + velocity).
The increase in velocity, however, would probably work against the increase in price caused by increased adoption.
It would be interesting to find a way to differentiate between these two powers affecting the price.
Topic: [Bitcoin Future Price Formula] Published by italian Bitcointalk member! (Read 6295 times)
January 23, 2014, 06:26:01 AM
January 04, 2014, 08:33:34 PM
A question for you, OP.
(By the way, don't take it personal, but I won't read through an auto-translated technical text, that's really not going to help me much.)
Since e is a constant, essentially your BTC price formula is an (exponential) function of the total number of BTC addresses. My question then is: how do you see it as significantly different form the countless attempts to model BTC price as an (exponential) function of time, the most well known one on this forum the linear regression of BTC price mapped to a log chart (recently rpietla made a big thread about this, IMO, rather uninformative method).
Looking at the graph in your Italian post (the blue line in the last graph, right?), it looks to me like your "formula" suffers from the same problem as the purely time dependent (linear regression) model: it gives a decent idea of the order of magnitude of BTC price at any time, but it is significantly off at times, and therefore more or less useless for trading -- more precisely: it is good to know that we can expect BTC price to be in the range of 1000 in mid 2014, but for example right now, your formula is "wrong", in an empirical sense, and it was even more off target a month ago.
(By the way, don't take it personal, but I won't read through an auto-translated technical text, that's really not going to help me much.)
Since e is a constant, essentially your BTC price formula is an (exponential) function of the total number of BTC addresses. My question then is: how do you see it as significantly different form the countless attempts to model BTC price as an (exponential) function of time, the most well known one on this forum the linear regression of BTC price mapped to a log chart (recently rpietla made a big thread about this, IMO, rather uninformative method).
Looking at the graph in your Italian post (the blue line in the last graph, right?), it looks to me like your "formula" suffers from the same problem as the purely time dependent (linear regression) model: it gives a decent idea of the order of magnitude of BTC price at any time, but it is significantly off at times, and therefore more or less useless for trading -- more precisely: it is good to know that we can expect BTC price to be in the range of 1000 in mid 2014, but for example right now, your formula is "wrong", in an empirical sense, and it was even more off target a month ago.
December 31, 2013, 06:09:52 PM
It is a common place in network theory that the value of a network increases as the square of the number of nodes. GB's model uses an exponent of 2.26. The extra .26 would appear to be some confound which increases as sqrt(sqrt(n)). Identifying that component might win you a Nobel in economics, which you could then use to cudgel Paul Krugman into becoming an honest man.
December 31, 2013, 02:13:08 PM
The number of Bitcoin addresses is representative of the commerce and activity being done in the Bitcoin economy.
e.g.,
- Legitimate businesses like Bitpay
- grey market
- people sending and receiving Bitcoins to and fro from exchanges (internal trading in exchanges not included).
That is probably why it correlates in some form with the Bitcoin price.
e.g.,
- Legitimate businesses like Bitpay
- grey market
- people sending and receiving Bitcoins to and fro from exchanges (internal trading in exchanges not included).
That is probably why it correlates in some form with the Bitcoin price.
December 31, 2013, 06:39:47 AM
problem is that the total number of addresses can only go up, and btc price not -unfortunately.
not exactly: the addresses can stop growing at this speed ',
or in the worst case stop growing completely, then remain constant over time.
In this case surely there would be a negative fallout on prices.
December 31, 2013, 06:19:09 AM
problem is that the total number of addresses can only go up, and btc price not -unfortunately.
December 31, 2013, 04:58:28 AM
Velocity of money has no direct relationship with money's value, because in equation MV=PQ, M means the money in circulation, not money in existence
For example, banks could put only 20% of the total money supply into circulation and put rest 80% in reserve, so that even velocity of money increased by 5 times, the price level still do not change
In bitcoin's case, since every one is their own bank, their saving/spending ratio will greatly affect the price level, even the money velocity stay the same. If everyone hold 90% of their coins, V must increase 10 times to keep the P constant, if V does not change, the P will drop 10 times, e.g. price per coin will rise 10 times. And that price appreciation will increase their saving/spending ratio
For example, banks could put only 20% of the total money supply into circulation and put rest 80% in reserve, so that even velocity of money increased by 5 times, the price level still do not change
In bitcoin's case, since every one is their own bank, their saving/spending ratio will greatly affect the price level, even the money velocity stay the same. If everyone hold 90% of their coins, V must increase 10 times to keep the P constant, if V does not change, the P will drop 10 times, e.g. price per coin will rise 10 times. And that price appreciation will increase their saving/spending ratio
I derived my equation from statistic analysis, now it need further investigation
for why it works (if it works for next year or so
)Your concept "propensity to save" is really interesting for my future work.
December 30, 2013, 10:55:48 PM
Velocity of money has no direct relationship with money's value, because in equation MV=PQ, M means the money in circulation, not money in existence
For example, banks could put only 20% of the total money supply into circulation and put rest 80% in reserve, so that even velocity of money increased by 5 times, the price level still do not change
In bitcoin's case, since every one is their own bank, their saving/spending ratio will greatly affect the price level, even the money velocity stay the same. If everyone hold 90% of their coins, V must increase 10 times to keep the P constant, if V does not change, the P will drop 10 times, e.g. price per coin will rise 10 times. And that price appreciation will increase their saving/spending ratio
For example, banks could put only 20% of the total money supply into circulation and put rest 80% in reserve, so that even velocity of money increased by 5 times, the price level still do not change
In bitcoin's case, since every one is their own bank, their saving/spending ratio will greatly affect the price level, even the money velocity stay the same. If everyone hold 90% of their coins, V must increase 10 times to keep the P constant, if V does not change, the P will drop 10 times, e.g. price per coin will rise 10 times. And that price appreciation will increase their saving/spending ratio
December 30, 2013, 06:00:03 PM
the red line are the zero balance addresses... that are 90% of total addresses.
I think the zero balance addresess depends from bitcoin velocity of circulation !
interesting hypothesis. I'd have to get back to you on that one.
December 30, 2013, 05:57:08 PM
Ah yes. The comforting reminder that should there be a nuclear WWIII or some kind of near-extinction event, mankind will surely survive, as there will always be one guy sat with a graph, drawing a line through it.
December 30, 2013, 05:54:17 PM
some of the web wallets might for instance have incomplete, but statistically meaningful information that they MIGHT be able to use to predict the BTC price.
people always talk about all these security problems on here but no one ever seems to mention that the web wallets have massive database of Bitcoin address:IP mappings. Always seems more fun to discuss the security aspects of open source tools.
this was really part of why I invented confidence chains, the exchanges have really way too much power in this whole equation.
people always talk about all these security problems on here but no one ever seems to mention that the web wallets have massive database of Bitcoin address:IP mappings. Always seems more fun to discuss the security aspects of open source tools.
this was really part of why I invented confidence chains, the exchanges have really way too much power in this whole equation.
December 30, 2013, 05:51:01 PM
but... "correlation does not imply causation."
.
At the end of my post, i wrote that I will do
some further investigation and explicate why the equation work...
but sintetically the total number of addresses
a) depends on the number of users (as seen from the correlation with the number of active addresses)
b) and also dependends on the velocity of circulation of bitcoin
you might be able to do some advanced operations with graph analysis. I wrote a Bitcoin Block Chain graphDB importer: https://github.com/BlueMeanie/bitcoingraphdb , it puts inputs and outputs on a graph so you can traverse them.
I had given thought to the problem once before- how do you measure velocity in the Bitcoin network? you would need to know more information that just the basic block chain.
TX fees are perhaps somehow related to velocity because no one is going to make some kind of fake transaction to themselves with a TX fee. So it's a more reliable measurement.
I too wrote a tool for analysing the blockchain... I product some tables and graph before derive my equation,
and I have really interesting result:
Fo example, Here we can see how the total address are moving in the time, divided in some category of capitalization:
the red line are the zero balance addresses... that are 90% of total addresses.
I think the zero balance addresess depends from bitcoin velocity of circulation !
Add you can seee that at end of 2011, the bitcoin world tend to stabilize, this is why I used
end of 2011 to 2013 data for derive my equation.
December 30, 2013, 05:47:51 PM
but... "correlation does not imply causation."
.
At the end of my post, i wrote that I will do
some further investigation and explicate why the equation work...
but sintetically the total number of addresses
a) depends on the number of users (as seen from the correlation with the number of active addresses)
b) and also dependends on the velocity of circulation of bitcoin
you might be able to do some advanced operations with graph analysis. I wrote a Bitcoin Block Chain graphDB importer: https://github.com/BlueMeanie/bitcoingraphdb , it puts inputs and outputs on a graph so you can traverse them.
I had given thought to the problem once before- how do you measure velocity in the Bitcoin network? you would need to know more information that just the basic block chain.
TX fees are perhaps somehow related to velocity because no one is going to make some kind of fake transaction to themselves with a TX fee. So it's a more reliable measurement.
December 30, 2013, 05:33:23 PM
The velocity of money certainly has real-world relationship to exchange rates and could be used as a more reliable determinant.
I know, already wrote in the original post and here
the next step of my work is to prove that number of addresses represent the aggregate value of
users and speed speed of circulation of bitcoins
December 30, 2013, 05:31:43 PM
but... "correlation does not imply causation."
.
At the end of my post, i wrote that I will do
some further investigation and explicate why the equation work...
but sintetically the total number of addresses
a) depends on the number of users (as seen from the correlation with the number of active addresses)
b) and also dependends on the velocity of circulation of bitcoin
December 30, 2013, 05:21:05 PM
In real-world economics there is the Velocity of Money: http://www.investopedia.com/terms/v/velocity.asp
which is somewhat related to what you're measuring. The reason why you can't measure money velocity by measuring TX volume is that anyone can create TXs for free(perhaps not so true anymore). Perhaps if you somehow included TX FEES, because this ensures that money is being transferred to a third party that cannot be pre-determined.
The velocity of money certainly has real-world relationship to exchange rates and could be used as a more reliable determinant.
ciao,
-bm
December 30, 2013, 05:17:13 PM
The number of addresses is a reflection of the number of adopters, and probably can be used to predict the price statistically, but this could never be used as a true determinant because anyone can create new addresses.
this is true, but actually there are 24671534 addresses in the blockchain,
so the Law of large numbers is in action !
And remember that if someone create and address BUT dont use it, that adress don't appear in the blockchain !!!
The number of address in the blockchain give us a magnitude of total bitcoin utilization !
sure this is true. If your formula was ever incorporated into some real-world strategy, it could be very easily manipulated.
you should have kept it secret and used it as a hedge.
but... "correlation does not imply causation."
very cool work though gbianchi.
December 30, 2013, 05:14:50 PM
The number of addresses is a reflection of the number of adopters, and probably can be used to predict the price statistically, but this could never be used as a true determinant because anyone can create new addresses.
this is true, but actually there are 24671534 addresses in the blockchain,
so the Law of large numbers is in action !
And remember that if someone create and address BUT dont use it, that adress don't appear in the blockchain !!!
The number of address in the blockchain give us a magnitude of total bitcoin utilization !
December 30, 2013, 05:05:34 PM
The number of addresses is a reflection of the number of adopters, and probably can be used to predict the price statistically, but this could never be used as a true determinant because anyone can create new addresses.
December 30, 2013, 04:44:22 PM
Well it's interesting and surely I agree that I would expect the general price of BTC to go up...particularly because money is being printed at a fast rate and BTC is only coming out in limited quantity. But it doesn't tell you too much, you just assume addresses will mean higher prices.
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