Topic: Gold is Bitcoin is Gold - page 4. (Read 8885 times)

I've been thinking of it like calcium oscillations in a muscle cell. When the cell is stimulated to contract with some drug it will pump in and out calcium at a certain frequency. The frequency and amplitude are a function of the magnitude of the initial stimulus (drug dose) and decays over time. This is due to various feedbacks etc. Repeated doses result in overlapping waveforms that may cancel each other out or add together.

For markets the drug would be a period of higher than normal buying or selling volume. The problem is we have no way to predict which drug (Rally or crash), when the "drug" will be given, or at what dose. But perhaps we can predict what the effects of different drugs would be on the market by analyzing its current state.

To an extent. A sequence is one factor; nothing happens in isolation.

If a pot of boiling water is stirred, the bubbling will subside briefly. The more vigorously it is stirred, the longer the bubbling will be stalled. That's a very simple example, so you can imagine various possibilities - what happens if salt was dissolving in the water, what if the pot is oddly-shaped or made from tungsten instead of steel, etc.

I think what you are really doing is looking for sequences of events, the duration of each may be less important.

I'm actually a complete novice at trading. I'm just now trying to figure out how bitcoinica works.

Hold up - what happens in Bitcoin over one or two days should take longer in gold. There might be another day or three of pressure and decline in gold. Today has a good chance of being just the first test of the $1630 level. I'd give it until the end of the week to be sure.

You're right on needing to assess additional factors. I think the percentage delta could narrow with regard to the magnitude/time element above. Then the psychology and social awareness notions come into play - Bitcoin doesn't seem to be viewed as savings yet (which would help improve the stock to flow ratio), and there's a disproportionate number of aggressive traders and (I think) sophisticated manipulation.

If you think of any other major factors, I'm all ears.

Ha, now for that move "bitcoin time" passes slower than "gold time"... I see the pattern, but the x and even y axis (percent change doesn't work so well) need to be adjusted. I wouldn't be sure you have something unless you can figure out these factors.

Thanks for following

The gold price has greater elasticity than Bitcoin's does right now, owing to the magnitude difference in both the underlying asset markets as well as their derivatives. They're also not exactly "in phase" but I think they are sufficiently enough for the correlation to remain. I'm now fully convinced that it exists. Take a look for yourself as gold was pushed down almost 1.3%:



It's very difficult to determine in real-time whether that spike was due to overwhelming buying pressure or the big short(s) covering. Gold isn't in the clear yet - it'll be fought tooth and nail until an exogenous event (QE3, Iran, etc) denies the sub-$1700 range. This could be short covering like what happened in Bitcoin during April 1st and 2nd (the dip & spike below), where covering took place and the freed short ammo was re-applied.



Patterns do exist with similarity on all time-scales. It's just tough spotting them. These are too close to be denied - the same methods are used over and over.

I'm unsure that analizing this kind of patterns with Bitcoin is useful since it's economic is so tiny and insignificant compared to the others.

A single trader with not so many money (a couple million $ is pocket change for fund managers and such) has the ability to make oscillate the Bitcoin value from almost 0 to almost infinity in a relatively short period of time.

Anyway, since I find miscreanity fundamental (i.e.: non tecnical) analysis awesome, I follow the thread with interest

That's what I'm leaning toward: natural patterns of opposing forces.

Market cap is undoubtedly a factor in the ratio, just not the only one. I could be completely wrong about this whole situation and it might end up being completely overshadowed by social/psychological factors. Or gold could be in a much stronger position than thought. I suppose we'll see soon.

+1

Gold is a very mature 'product' to trade in whereas bitcoin is very young and still finding its place in the world. The real value will not be realized until further on down the line. Its difficult to gain a foresight by extrapolation of historical prices.

Well, market cap may be too simple to explain the ratio. It should also be related to the sensitivity of speculators to price movements, which would be a psychological factor. Perhaps 1 btc week = 1 gold year could arise naturally.

There should be some reason that [1 BTC week = 1 Gold year], [1 BTC hour = 1 Gold Day], etc. This should be a function of "market cap" or whatever the equivalent is for gold/bitcoin. If the highest correlations are consistently found using pyschologically appealing numbers for the relative time frames (1 day = 1 month, etc), this would indicate manipulation would it not?

Very interesting tracks in Bitcoinica's data.

If paper gold is knocked down by Wednesday, I'll be fully convinced of the correlation.

If not, back to the drawing board

Not exclusively. As mentioned, both the structure and the function of the two assets are different. It's like trying to equate stocks with bonds - trying to value one using techniques that are effective for the other generally ends up with results that don't make sense. Bitcoin and gold are functionally equivalent, even though their structures are different.

Given circumstance/input A:

Stocks behave in pattern A
Bonds behave in pattern B
Gold behaves in pattern C

Given circumstance/input B:

Stocks behave in pattern B
Bonds behave in pattern C
Gold behaves in pattern A

And so on for input C, D, etc...

Each asset class responds in a different way to various events and situations, which is why they rise and fall at disparate times. Since Bitcoin is functionally equivalent to gold, it is reasonable to expect it to behave similarly with the same inputs. In the above examples, pattern A occurred in both stocks and gold, but were dependent upon different inputs.

What may be possible is observing whether input B frequently follows input A. Then a pattern A in seen the NASDAQ might be forthcoming in gold if there are signs of input B. A 50,000 ft overview would be of historical currency debasement/inflation - the pattern has occurred so often through the ages that the current similarities are very likely to eventually lead to what has happened in the past.

Coming back to Bitcoin, there is a question of magnitude. Because Bitcoin is a micro-economy, any adoption will cause its growth to be much greater than gold; that means the time-frame will be compressed - it's possible to see 100 years of gold's growth in 100 weeks. In addition, similar patterns are occurring at the same time - makes sense because of the functional equivalency between gold and Bitcoin. That accelerated, exponential growth would also occur synchronously in a hypothetical stock exchange 1% the size of NASDAQ, as long as the two work in a similar fashion.

One thing to keep in mind is that Bitcoin is mostly growing as a transactional medium right now, rather than a store of value like gold is today. The former is relatively unknown while the latter is familiar to everyone and has been for thousands of years. Bitcoin supply is also growing at ~25% annually; gold supply increases at ~1.5% per year. These are the factors that introduce some divergence, but they're still similar enough to be highly correlated.

Always consider which asset class best describes the item in question: commodity, equity share, contract, currency, etc. Everything else tends to fall into place after that.

tl;dr comparing apples to oranges is still comparing fruit - comparing apples to steel is completely different.

Thanks for reading .

Seriously arepo, you seem pretty critical lately.  Is everything alright dude?

oh, thanks for the x-axis 

Nasdaq graph starts 19 years after the start of the gold graph.

from this graph alone it looks rather like Nasdaq leads gold.

Blue= Monthly nasdaq composite close Nov-95 to Feb-2012
Red= Monthly Unadjusted Gold Ounce/USD Jan-1976 to April-1992


Should we use gold to predict Nasdaq?