Topic: Old Trend vs New Trend vs Unsustainable Bubble ??? + "6 Step Pattern Analysis" (Read 9780 times)

Looking awesome
And i like the term "stable exponential growth".

thanks for bumping this thread, forgot to update in december.
I think we will see the "false signal" in the next couple of days... We will see a new strong uptrend towards 1000 USD (5)

After that, we will see a small crash event (orange arrow) and after that a consolidation towards 1000 USD (approximately) (6)
I guess we will see the start of a new "bubble phase" in march (green line)



This detailed chart should be added to this chart, but the lines are getting smaller and smaller, so I do not think it would be readable:

That would be great because this was a decent analysis.

Updated chart?

I should update my chart. I do this in a couple of days.

It seems that the "new trend" is stronger than I expected. But nonetheless, we went through [1], [2] and now we are at [3] recovery.

Fifth addition (to https://bitcointalksearch.org/topic/m.3466206):

In my previous postings I assumed that any Bitcoin takes its value from good and services in circulation plus speculation. But over long time the speculation should go back annealing zero.

This is not the full story. finally the the point may be that the money amount to be mapped to Bitcoin may be much bigger than M0 US Dollar. E.g. people will start to trade assets with Bitcoin. Let's take Apple inc. with 934,8 Mio. stock papers each worth 526.75 $. That is a total of 492,4 Bil. $.

In the future we should be able to trade stock papers like Apple with Bitcoin. That alone would imply

   492,4 E9 USD   /   21 E14 BTC  = 22,585.7143  USD / BTC        i.e.     1 BTC = 22,586 USD

This example is limited to only Apple. But it shows one fundamental problem with legacy currencies (fiat) - the amount of money used is not M0. But with Bitcoin in the first order we just would have a M0 supply.

However his might be solved. It shows clearly the potential of Bitcoin beyond anything anything known from other assets.

18 december is early this year

We are in innovators or maybe just starting to enter early adopters.

But to be more precise, we have to look at both the currency use of bitcoins and the investment use. In terms of currency use, we are still deep in the innovators phase. It's the part where there is pretty much no everyday use for the currency for the average person, just a very few niche uses - let's not kid ourselves here - but that doesn't mean these uses won't grow. But in terms of investment use, we are starting into the early adopters phase I think. We have forward-thinking non-technical people starting to buy in, whereas a year ago it was mostly extreme bleeding edge techies or radical libertarians (both types of innovators) buying in.

Since investment is always about anticipating other future uses (in this case currency, remittance, stock market, smart property, etc.), it will always be ahead on the adoption curve. They buy and hold in anticipation that Bitcoin will become the backbone of the financial internet. They are forward-looking in their vision but not innovators in that they don't necessarily want to deal with the currency aspect (they might once they get into it, but that's a side effect; the important thing is they bought for the investment, not in order to enable specific purchases).

See here for a better explanation of the early-adopting investor's role: http://www.reddit.com/r/Bitcoin/comments/1mb27q/bitcoins_vast_overvaluation_appears_caused_by/cc7i6y8

good stuff

Translation for my wife (and other people):

1E6 is computer programmer for 1×10⁶ or 1,000,000 (or 1 with 6 zeroes after it).

Ummm....it's new. Easy of use applications haven't begun to develop. Eco system is infantile.  Exposure infantile.

ADDITION: I was on my cellphone stopped along a motorcycle ride when I wrote that short response.  But I have to add some obvious things there. First of all, Derp, you are completely misunderstanding that S-curve graph. This adoption is based on people integrating it into their lives, not about hearing about it on the news or something about bitcoins from a friend, etc. 

So we are at the early stages or early adopters. Not anywhere close to beyond that.

Think about your life Derp and technology just a little bit. In 1978 I went to the worlds fair as a young child and saw one of the first car cell phones.

It was over 2 decades later until cell phones were a viable option for most 1st world citizens.  So I new about them in 1978 and used them in 1998. This is typical of technology. I mean the internet is 20 years old and 20% of the US still doesn't have it or has some version of it that is so slow they can't use it.

Right now you are making the weakest possible case against bitcoin. You are basically arguing that it won't grow any more because it hasn't grown fast enough. Just think about what you are even saying here.

Fourth addition:

There are other estimates like this one:
The Target Value For Bitcoin Is Not Some $50 Or $100. It Is $100,000 To $1,000,000. - Falkvinge on Infopolicy

My comment on that is:
 1. Nothing is impossible
 2. the range of 1E5 to 1E6 USD for 1 BTC is the order of magnitude of my most positive estimate (last posting)
 3. not to forget due to the fact that debt is not a concept in the Bitcoin universe the comparison to other currencies in FX markets might not work
 3. finally as in my own estimations none of the used parameters are fixed except the number of Bitcoins - every number is just a guess

But it is very interesting to see that two very independent estimates come to a comparible result for the long time value of Bitcoin which is in the same order of magnitude:   600000 USD   ~   $100,000 To $1,000,000   ---   on the other side 1E6 USD seems to be an upper limit (except USD goes into hyperinflation)

Without being a spoilsport I think we will end up in the range 1E3 to 1E4 USD for 1 BTC in the next years.

Third addition:

There is one more szenario not to forget. Bitcoin really proofs its capabilities and are widely accepted. 30% of the people in the important countries (that is 1.26E9) use Bitcoin and produce each one 1E4 USD each year. Then the calculation would be:

 1260E6  /  21E6  *  1E4   =   600000

That is 600000 USD for 1 BTC. Even if Bitcoin is very successful I would not expect this kind of szenario before most Bitcoins are mined. The next question would be how the market is shared over alt currencies.

Second addition:

The previous calculation is fairly naive and does not consider companies etc to use Bitcoin either.


There are other ways to calculate the value. Eg. simply take the amount of M0 USD currently in circulation. That is   3.1 E12  USD. Then one can assume that 1 promille may be traded in Bitcoin.

3.1 E12   *   1 / 1000   = 3.1 E9

Since there are max 21 E6 BTC  the value of one Bitcoin would be:

3.1 E9  /  21 E6  =   147 USD    (pretty low, is it ?)


Or one can take the GSP of the USA 15.6 E12 USD and say 1 promille will be done in Bitcoin:

15.6 E12   *   1 / 1000   = 15.6 E9

that would be

15.6 E9  / 21 E6 =  743 USD    (looks better)


So finally there are limits to the value rise of Bitcoin. But since it is not limited to USA and 1 promille seems to be very low in a society where services are getting more and more important my expectation for the fair value is between 1E3 EUR and 1E4 EUR for one Bitcoin.

Finally it should be clear that the price level is not a question of these kind of calculations but more of believe. That means that the mapping value:  1 BTC -> 200 €  is just based on the assumption that Bitcoiners use 1 BTC to trade their goods and services for that 200 €. Maybe in the future 30 % are lost and another 50% are saved somewhere in cold storages and never used then the price level would be much higher.

But the very important thing to say is: The long time value does not depend on speculation but primarily on the trading volume. For that it is very fundamental to create more everyday services being paid with BTC.

People in the world

that would be around 7.2 E 9   people in the world right now

0.01%  *   7.2 E 9   =   7.2 E 5   =    720000

0.01% of people in the world = 720000 people

I think that would not be enough. But let's see the population in the countries:

    China    1,388,372,481
    India    1,257,350,942
    USA       320,915,326
    Indonesia    250,871,292
    Brazil    200,932,589
    Pakistan    183,163,329
    Nigeria    175,288,575
    Bangladesh 157,249,610
    Russia    142,708,789
    Japan    127,094,048
    Mexico    122,833,076
    Philippines 98,975,005
    Ethiopia    94,922,297
    Vietnam    91,975,832
    Germany    82,700,785
    Egypt    82,510,756
    Iran       77,796,027
    Turkey    75,241,661
    Congo    68,144,637
    Thailand    67,082,643

I marked the important ones green. that would be:    4,243,284,569

I would expect that minimum 1 % would use BTC former or later  ~   42 Mio people

If each of them produces BTCGP (BTC Grand Product) equivalent to 100 EUR / year
then the fair price would be around 200 EUR   =    42 E 6  /  21 E 6  *  100

That would mean that we are near to the fair price and everything else is speculation. But there is space to play with the numbers eg. BTCGP = 2000 EUR   then   the fair price would be   4000 EUR

Well according to that logic, we are nowhere on that graph, because its impossible to know the outcome. How about we have a version, "where are we on that chart, if price peaks $266?"

Dumb.


Again, explain why the price is so low if its so set to take off. $200 isnt nearly enough for even a tiny economy.

Lol@ saying we are in majority phase because some of your friends have heard about it. It's one thing to have heard about it, another to adopt it. The vast majority of the world has not heard of it. Fact.

You are way off. And extremely short sighted.

If only 0.01% of people in the world will ever use it that means that bitcoin has never been able to get passed the early adopter phase and the experiment simply failed.

its all relative. if only 0.01% of people in the world will ever use it, and the last person learned about it tomorrow, thats still a "laggard"

I enjoyed reading this.

Thank you.

If it's a niche thing that means we're definitely not in the majority phase yet. If it remains a niche then it simply won't reach the majority at all. This is a possibility ofcourse, but if it does reach out into the mainstream (majority) then the current value will seem like absolutely nothing.

Its either early or late majority and it depends on how much value bitcoin really has. I'm thinking late majority, otherwise the price would already be much higher. Too many wealthy people know about it to not have pushed the price in to the thousands, if it really belonged there.

I have coworkers and friends who have brought bitcoin up to me... 2 of them miners and one of them with an ASIC order. Those who I have talked to about it agree for the most part its a niche thing. Few want it, even less need it.

LOL. Bitcoin investors are still a small minority, we are still in the early adopter phase. Once my friends become interested in bitcoin I think we will have reached early or late majority.

I think we are at the start of early majority...

Late majority?  What?  No one I talk to has even heard of Bitcoin yet.  I live in a very populated area, considered pretty "high tech" too.  How are we in the late majority? 

We are at the beginning of Early Adopters.

Entering late majority.

Where in the curve are we now ?

we will see this trend accelerate until a we reach majority in the adoption curve:


I just want to point out that volatility will become smaller when more prople buy and hold.

So it's 'stable' exponential growth which itself is exponential again as well. Very stable indeed.

Update:

My prediction for the future:
There will be less volatility due to more (and rapid) adoption of bitcoin (more investment, less speculation). So we will see smaller bubbles.
The current 2013 bubble is much smaller than the 2011 bubble (smaller slope of the red lines and shorter lines).
If this trend continues, we will see at a certain point just stable (exponential) growth.

Price seems stable above $200. Its starting to become a psychological floor now. So you're right we are probably in "consolidation" until the next spike.

If the BTC will not jump in the next day or 2, I will call the recent drop from 233 USD towards 160 USD as the latest "Mild Crash EVent" and we are now oficially in Consolidation [6] until 18 december
I will then also update my chart

Food for thought. Basically these trendlines are more attractors that tend to reel the price toward themselves based on the happenstantial occurences in the market.

Agree fundamentally. Oda explains the background:


In the world there is a fundamental trend for increasing acceptance of Bitcoin which is a strong supporter for the the lower bound (0.46% a day). But on top every boom burst event shifts or lifts the trendline upwards.

I voted 'new trend', but it's not exactly representative of my own beliefs: I think we will continue to bounce between various trends, based on both btc fundamentals and market dynamics (i.e. a feedback loop).

I've written the following argument several times throughout the past months, but there seems to be this widespread believe that there is *the one trend* that governs the price. And then, when the price actually deviates from what that trend predicted, people say that before growth continues price first needs to "fall back" or "deflate" back to the price predicted by the old trend.

Nothing like that actually happens. In an already simplified picture, what actually happens that external (fundamentals) and internal (the market) reasons create various trends, and control which trend price follows at which point, and for how long. Those trends are perhaps attractors, so "falling back to an old trend" is certainly a possibility, but what we saw in the post-April period is that price can also just pick up from some point on a new trend, but continue from there on another trend. That is, price didn't need to "deflate" completely, as so many predicted -- it simply dropped a point at which the market concluded that btc is priced reasonably low, and then continued on a slightly more sane growth path than the super-exponential one we saw in April (and perhas now, when we were getting close to the ATH again).

What I'm trying to say is: trends are maybe a useful tool, but I don't think any particular trend will govern price within the next year. I would only say we can describe the boundaries: Barring catastrophic news, the "old trend" will mark the lower bound, while the upper bound is probably marked by what you call the "new trend", barring extremely *good* news re: adoption and awareness. (keep in mind, while the *relative* increase, roughly one order of magnitude, has many precedents in btc history, the *absolute* amount of money needed to enter the market increases -- it's not imossible that this will happen, but it will require some particularly good news, like a large enough online retailer accepting btc, or something like that)

I am hoping we go up soon just because I'm bored with this price level, but that probably means consolidation until I (and others) start to doubt the Fall 2013 bull run, at which point it will probably start again. I don't know. If it doesn't go up within another week, I will reconsider the way I view the recent signs, which by all appearances seem to be nothing other than very strongly bullish. But I think it will.

No it doesn't match the other lows but it's a nice lower bound (it touches the graph twice and is south of the graph for the rest of it). Sometimes it's nice to be conservative

indeed, thats probably the reason why the 6 step pattern lines are smaller than in the first bubble: The 2013 bubble is smaller than the 2011 bubble...

If we dont go exponential in the coming days, I will change my second chart and I call the "Mild Crash Event" at 233 USD. Than we will see Consolidation until approximatly 18 december and hit 233 USD again, which will start a new (3th) trend line.

and people didn't know if bitcoin will be accepted by others and applied to the economy. Today we know it will happen.
I think that growth wont be linear but more like exponential.

Because last time (2011) the bubble was way bigger.

+1 vote for the very long term trend. Somewhere around $2000?
In case we have a bubble / crash around that time, could be anything between $300 and $3000.

There is still a possibility that we go to the old trend line again. We go from boom "Bitcoin to the moon" to bust "Bitcoin is dead". Why would it be different this time?

We assume that the trend line is caused by growth of fundamentals and is not affected by boom-burst events. It is reasonable assumption in stock trade, but BTC is special: because of network effect it's fundamentals are affected by awareness, which comes with bubbles. So we should expect the trend line go up after each boom. If it happened this time, the new trend line would be parallel to the old line (0.46% a day), but above it, on 4x distance. So in one year time we can expect 300*(200/55) ~ 1100 USD.

Great analysis. I agree on all counts. The only thing I'd be sure to point out, although it is obvious, is that the trendline is the line of strong support, not the average price. So we can generally expect the price to be way above that.

It looks like either we power up to $600-800ish and mess around there for a while, or we consolidate in the 200s for longer. I personally feel like a big surge is bound to happen this week or next, but a longer consolidation or mild crash event isn't impossible.

Looks like it will break out to the upside over the next few months.  If so it may follow your new trendline for a while but ultimately go parabolic and end in an unsustainable bubble.  Bitcoin trades like a commodity and bullish moves end in an unsustainable bubble-like nature in many cases.

It might crash to really low like the last crash which I am waiting for buy some

or maybe we have already seen the event a few days ago
If thats the case, we will Consolidate [6] towards the new trendline but will not cross 233 USD until that happens.
If that is the case, a new (perhaps stronger) trend line will start at 18 december 2013 (just calculated the date )

Overall I think your analysis is sound. I just scoffed at seeing BTC at $500 by January lol. Even I'm not that optimistic. But I think we may be headed into the "mild crash event" you described shortly. There doesn't seem to be as much buying power in the market as there was a few days ago.

It is also possible that the recent drop at 233 USD will act as the "Mild Crsh Event" and that 233 USD will act as a resistance for a long period. Nobody knows

I just drew line 5 and 6 at random. As I stated, I dont know the date for the "Mild Crash Event", nor the price when this will happen
(crashes are mostly unpredictable)

edit: about the "false signal":
I didnt buy in this new trend. My last buy was at 158 USD in the recent drop from 220 USD (i use bitstamp for trading)
My buy before that was at 130 USD

Its interesting analysis...but just looking at your prediction the "False Signal" in [5] is a substantial gain (to well over $500). Thats more then just a false signal, thats an increase larger than the initial bubble

thanks

I was thinking of creating these charts a few weeks ago, but didnt had the time. And now, with the current "bubble", I felt I needed to do this ASAP

Cool thread. Breath of fresh air in here.

And here is my "6 Step Pattern" analysis:


First I would like to say that im a believer of the "new trend line"
I may be completly wrong, but I see 6 pattern lines in the previous trend line, until the new trend line started.

1 is the "Initial Bubble",
2 is the "Crash" (followed by a strong downtrend)
3 is the "Recovery",
4 is the "Mild Downtrend"
5 is the "False Signal" (something that looks like the new trend, but isnt)
and finally we see a new "Mild Crash Event" (arrow) and then 6, the "Consolidation"
The price at this "Mild Crash event" acts as a resistance, until a new trend line starts!

When we compare this to the new trend line started at approcimatly 9th of january 2013:
We see the same pattern appearing:
1 and 2 are clear.
We reached >140 USD in september [3], then trending down towards 125 USD [4]
And now, we see a big boost in price [5]

So what do I think will happen?
We will folow the "bubble trend line" for a while, and when we see a new "Mild Crash Event" we will consolidate towards the "New Trendline" [6]
I cant predict the date, nor the price point of the "Mild crash event", but im pretty sure this will happen
(so the second red arrow indicating the future "Mild Crash Event" can be placed anywhere on the blue line. Maybe it already happened when BTC went down from 233 USD towards 160 USD in a few hours. In that case, we are in Consolitation at the moment [6] until 18 december 2013.

thats doesnt seem to match the "lows". We can, however, extend the old trend line towards februari 2011, that makes no difference, but I would rather not (Ill post why in a few minutes)

I leave the early days of bitcoin out. The start of the old trend line was taken at the moment when DPR started advertising The Silk Road, and bitcoin became usefull at once (ignoring the 10k BTC pizza :p )

How about a very long term trend between Oct '10 and Jan '13?

I had some fun with the price chart and created this (calculations below)



The old trend is clear. Starting on 04/04/2011 at approximatly 0.70 USD with a daily growth rate of apprimatly 0.465% we hit 14 USD on the 9th january 2013. If this trend line never had changed, the price of 1 BTC today would be 55 USD.

This last date is the new breakout point for the second trend line
Based on these numbers: 9 januari/14 USD and 2 october/125 USD,
the new trend line shows an average price growth of 0.825% per day.
The current price should be (according to the new (green) trend line)
approximatly 158 USD

Some people argue that we started a new trend line, but this seems unlikely... That would be a growth that is too exponential...
starting on 2october/125 USD and using 140 USD (on oct 11) and 190 USD (on oct 26) as support:
a stunning daily growth rate of 1.76% !! This seems too high.
Although, at the moment, the price is roughly following this trend (based on the numbers, it should be 207 USD)

Finally, lets look at these trends in 1 year:
The old trend predicts in 1 year a price of 300 USD
The new trend predicts in 1 year a price of 3170 USD
The New bubble trend predicts in 1 year a price of 120861 USD
I also added 2 options: a bitcoin crash and a USD crash

VOTE!

analysis of my "6 Step Pattern", see below!