Topic: It's not a bubble I promise (Read 2611 times)

I figured out the probability function which represents demandwas a logistic curve closely related to Tanh[t].  Then it was all pretty smooth...the model absolutely NEEDS the supply of bitcoin to distinctly less than a linear function or else it doesn't go well but yeah, this model does seem to loosely respect the large time scale behavior we have seen of bitcoin.

Here is a google drive with the mathematica files as well as outputs as PDF's of the plots, the raw text files, and "CDF" files which apparently are computable even if you don't own mathematica but I'm not sure.

https://drive.google.com/folderview?id=0B2HU2oGcAN_SSllnYkd0VThTcW8&usp=sharing


This is the main idea of the code there though there is a bit more in the google drive... this will get a dynamic set of plots going you can mess with with your hands varying parameters.  The plot shapes all look pretty good and are extremely sensitive to the supply function controlled by the parameter th:

(* Bitcoin price model plotter // Altoidnerd 2013*)

Demand[t_] := 1/(1 + Exp[-t/tp])
Supply[t_] := t*2^(-t/th)
{Slider[Dynamic[tp], {0, 29, .1}, ImageSize -> 1300],
 Dynamic[tp], "= propogation time tp"  ,
 Slider[Dynamic[th], {0, 3, .00001}, ImageSize -> 1300],
 Dynamic[th], "= effective bitcoin supply"}
Dynamic[
 Plot[Demand[t]/Supply[t], {t, .0000001, 20}, ImageSize -> 500,
  AspectRatio -> 1/1.6^2]]
Dynamic[
 Plot[Log[Demand[t]/Supply[t]], {t, .0000001, 20}, ImageSize -> 500,
  AspectRatio -> 1/1.6^2]]

(* You can comment out this table if you just want to use the sliders \
to mess with the graph.  If you run both the dynamics and the table \
you'll see a cool animation but after that you'll be manipulating \
over 200 plots simultaneously*)

(* Table[
{Plot[Demand[t]/Supply[t],{t,.001,5},ImageSize\[Rule]500],

Plot[Log[Demand[t]/Supply[t]],{t,.01,5},ImageSize\[Rule]500]},{th,1*\
10^-3,.9995,5*10^-3}] *)

What is bubble?

I'm no theorist or economist, but I would attribute the increase in price just to be all the global press lately including some highly publicized articles worldwide about people becoming rich off bitcoin even if it has been happening for a long time lol. I need to start penning a book on all those bitcoins I bought a couple years ago for dollars.

yes absolutely.  I am talking about the bottom level interactions driving the price and it is an extremely simplified model.  I do think it does explain the log plot and also suggests today's price is less stressful on the market than april's

justusranvier -

They correspond to the demand function in my model which is certainly an exponential for times much less than the prolongation time



Yep those are some great plots.  They represent the cumulative distribution function that is the solution to this problem dammit I cannot remember what it's called and I'm drawing a blank on deriving it right now.

http://www.reddit.com/r/math/comments/1q3ui9/what_function_represents_the_probability_pt_that/


It looks like we can almost use this data to estimate the constant that describes that exponential behavior.  It is then a matter of comparing that rate constant to the bitcoin generation halving rate (4 yrs?) because as I said you would arrive at price goes like (for t small compares to the characteristic time of this distro)

P(t) ~ 1/t * exp[t / t₀ ] * 2 ^t/t_h

where

• t₀ is essentially a characteristic time of propagation for bitcoin on earth,

• t_h is indicative of how often the BTC/block halves what is it 4 years? (and this factor is fudged because ok...this one is weird...this function is discrete but I have a feeling human beings, who are aware of the function will sort of smooth out those kinks....could be wrong though...this factor is loosely correct on say 4-8 year scales then)

• keep in mind for god's sake this is a ridiculously simple baseline model that is only capable of describing behavior on the time scale of YEARS if even that.  But it has some fundamental inescapable truth.  

Actually it presents a neat way to measure the speed what which a signal propagates throughout the world today in 2013.  if you look at those plots the characteristic time was much longer in the past and the curves are way noisier

Altoidnerd,

I agree with your assessment of the bitcoin future trend provided there is no successful intervention by non-market force of any kind, and not the PR sort of intervention in the media which as we have witnessed recently has become less efficient, but of a more influential sort of force, the possibility of which cannot be ignored.

I can't I only got like 6.

Send 100 btc to my sig address, I can double it, trust me.

My bet is that the price right now is quite close to the equilibrium value.  That doesn't exclude the high velocity of the past few days causing some fluctuations about the equilibrium point. 

But by a great many metrics I find this is not the same situation as april.  So while it is true the velocity has been too high and will cause some disturbance, there wont be a big dump.  There will be a little overshoot and some ringing effects while it the system comes to rest at its equilibrium place. 

Anyone want to put some BTC where their mouth is ;-)?

Nope, I dont see any big dump yet, but it will come later this week for sure because the price cannot sustain such daily increase without many taking profits

What about it exactly is incorrect?  The best thing you can do is use functional forms in systems with many interacting elements.

According to this simple supply and demand model, the price will eventually stop climbing exponentially because everyone who could have will have already heard of bitcoin and the supply halts.

At this point I don't know what it will do other than the simplest answer probably being true, its charts will resemble any other currency...it will have a quasi-static strength vs other currencies that fluctuates randomly but certainly it cannot continue the way it is going now.  I have point out two separate "early times" effects that have made bitcoin have insane gains at its outset that will not last. 

Bitcoin will not be brand new news forever. 

That nearly killed me.

It is shocking how poorly some people are using econometrics,time series, etc to make arguments regarding the price of bitcoin.

Well, it's time to say good night in China soon, so my guess is trading is going to slow down. But hey, what do I know?

I am not dismissing them but i can promise you that you will curse them enough in the future. The big dump has already started

http://bitcoincharts.com/charts/chart.png?width=940&m=mtgoxUSD&SubmitButton=Draw&r=&i=&c=0&s=&e=&Prev=&Next=&t=S&b=&a1=&m1=10&a2=&m2=25&x=0&i1=&i2=&i3=&i4=&v=0&cv=0&ps=0&l=1&p=0&

All I am pointing out is that this data for historical price log linear on the time scale for the entire life of the currency.  It is not an uncommon relationship in physics and economics.  This chart actually shocked me when I realized it but sure as shit - it really does show roughly 10x increase yearly.

I am impressed at the fast doubling time of the price, but the exponential character doesn't surprise me at all because it is what you obtain from diffusion of the signal (knowledge, or news of bitcoin) through the human race. If you model the demand for bitcoin being proportional to the number of people who have ever even heard of it, since this is still a small fraction of the population on earth, the demand will have the exponential form for early times.  It is only when a significant part of the populous has already learned of bitcoin and decided they don't like it that the demand will cease to be exponential.

if you don't believe me, draw on a piece of paper 50 to 100 dots.  Suppose at t = 0 only one dot is special.  Connect that dot to another dot which represents two nodes in communication.  The let each of those nodes "tell" another dot at random.  There is now a 99.5% (check this?) chance that there will be 4 connected nodes now, because chances are they will be connecting with another unoccupied dot.  Even at this stage, if we repeat the step, we will most likely be left with 8 nodes connected.

You get this chart for N, the number of nodes the signal has propagated to

t  |0    | 1   | 2   | 3   |   4  |   5 |
N  |1   | 2    |4   |  8  |  ?    |  ? |


In the last two bins we might not get 16 and 32...there is some non trivial probability at this point that one of the nodes will connect to another which already is connected.  it is around this time when the propogation of news through a network ceases to be exponential as some nodes receiving word may "already know."

What this does establish is good to prove my point so I will say that now... for small times (e.g. not too many folks know about bitcoin) the demand for the currency D(t) will go like


The supply of bitcoin is, at any moment in the present, a linear function in t. But the supply function is not actually ~ t because we know it has the limiting form S(t) -> S_final for large t.  In fact we know that it roughly have the form


The math speaks for itself.  If we model the price simply as P(t) = k D(t) / S(t) what do you find? It;s pretty marvelous actually!  Although for intermediate values of t the demand will begin to deviate from exponential behavior, the diminishing supply having the exponential in its denominator serves to offset this effect and in a sense create a roughly exponential demand price as a function of time even after the demand is no longer increasing in such a manner.

Head over to

http://btckan.com/price

and add up the trade volume of China and compare it to the rest of the world. Careful with dismissing China.

ATM's? Just one in Vancouver and that is not really a point for raising up this coin.

My personal prediction is overstepped by bitcoin. I never expected $300 this month!

This. Cryptos are possibly the most lucrative and difficult markets to analyse right now.

Bubble sounds so negative. In April with the jump to >100 it was already buying panic and short term bubble,
more than now, and still went higher.

That won't happen for now...the only you should be afraid of are daytraders....and they will come.

What will happen when lot of miners start to take profit?
Right now I believe they are just hoarding.

I'm a max keiser fan

Almost all predictions in this forum are biased and its mostly what everyone wishes to happen.

It's in the blog...this is right on cue with the historical growth.  It's an exponental system that was previously hampered by the negative impact of the last bubble.

When a system whose natural state is to gain a factor of 10 in a year, a recession looks rather mild.  But that recession has ended.  This point in time is truly right on the best fit line for the historical bitcoin data.

Well, you have to be honoust...where we at now IS a bubble. How do you explain a 300% uprise in a few weeks just by a chinese exchanger and SR2.0?  The dumpingdays will come...and with my stockexperience i guess that will be in the beginning of next week or there must come new exciting news like Ebay who IS implementing btc into their system.

He closed all the tabs, because one of them had this thread in it: https://bitcointalksearch.org/topic/inputsio-is-gone-im-calling-it-a-scam-326606

Why?  It's really not even an embellishment.  If you look for the time between .1, 1, 10, ... on the log axis....

perhaps you're confusing the meaning of 1000% with 1000x?  1000% means 50 cents -> $5 -> $50 -> $500 ...

Guilty as charged.

* closed tab *

Clearly bitcoin and alternative currency is not a bubble.

But your the same guy?

Lol funny though.

I really believe this guy, I think he knows what he is talking about.  Check this out.

http://altoidnerd.wordpress.com/2013/11/07/bitcoin-bubble-not-this-time-a-qualitative-analysis-of-bitcoins-price-and-lifecycle/