Topic: rpietila Calling the Bottom - page 13. (Read 45360 times)

To correct a few assumptions: there is a small transaction cost as well as a management cost in handling many private keys and an escalating risk in dealing with more keys than one can comfortably secure. (If this is happening and I'm sure it is on a small scale, it is a practical case of big wallets subdividing, to represent growth that has already happened)

Tumbling addresses as I understand are not part of the final count as they end up empty. And deposits at an exchange are most often pooled often in identified address, and wouldn't add a significant count. (I've done a few purchase lately with bitpay and found they even reuse address that end up empty so that doesn't add either. I think exchange withdrawals are a legitimate addition to the total as those are the final unique address holding coins that are counted.  

While the measurements may not be accurate I feel confident they are magnitudes more accurate than the tools to manage existing monetary policies.

As things stand this metric is waiting validation, and manipulation doesn't prove anything or give anyone a quantitative competitive advantage just yet.

Suppose that the MtGOX thief has 500'000 BTC divided into 150'000 addresses (3.33 BTC per address on average).  Each day he issues 75'000 transactions (one every 1.15 seconds).  Each transaction combines two of those parcels and sends them out to two new addresses.

He divides the addresses into two groups, A and B, 75'000 addresses each.  The two groups are alternated, so that for the first 12 hours each day the two inputs are chosen randomly from the current A group, and the outputs are added to the new A group, until the current A group is exhausted.  In the next 12 hours he does the same with the B group.  Thus the bitcoins that are input to each transaction are at least 12h (80 blocks) old.

Assuming that each transaction pays a fee of 0.00013 BTC, here is what he contributes:

  Number of transactions per day: 75'000

  Total transaction output BTC per day: 500'000

  New addresses used per day: 150'000

  Total fees (in BTC) paid per day: 10

These numbers match the current blockchain statistics.  Note that 10 BTC/day of fees is a small price to pay for tumbling the MtGOX stolen coins.  

Is this correct?  The point is that the current blockchain traffic is small enough to be "faked" by a small group, even a single person.

Anyway, those blockchain.info plots are rather strange.  They don't show increasing adoption.  I don't know what they are showing.

Transactions aren't free, they cost 0.0001 or more. Plus the time you balance won't be avaliable. Exchanges may also have withdraw or deposit fees on top of transactions fees. I don't think people would send money to themselves just for the lulz.

And I don't know altcoins that use Bitcoins transfer to test themselves. Might be my ignorance, because I'm not an altcoin developer.

However, since both new addresses and transactions are free, users and programmers have no reason to use them sparingly.  A substantial and variable fraction of those counts could be "fake" transactions, between addresses owned by the same person -- such as tumbling, hotwallet/coldwallet motion, software testing, etc..  Bitcoin deposits and withdrawals at the exchanges should also be counted as "fake" in this sense.  The blockchain traffic may also include testing of new altcoins or services built on top of bitcoin. 

Unfortunately there is practically no reliable and meaningful data on the bitcoin economy.

Whilst I agree with you that there is greater value in a network with an expanding the user base, you are making assumptions to the extent of its growth through circumstantial abstraction and could possibly be existing users moving funds around, creating more wallets, spending through greater merchant adoption, change addresses and tumbling coins.  I feel (not backed by data yes hypocritical of me   ) that alot of people have wised about about reusing adresses and think this will continue to increase as SPV clients are implementing HD wallets for smart phones...

Correct me if I am wrong, but unique change addresses have been used for a while with the bitcoin-qt wallet to help preserve anonymity. The rise in popularity of a particular wallet indicates some sort of economic progress, minimally an improvement in ease of use.

Metcalfe's Law, as interpreted in the context of the Bitcoin network, says that the network is more valuable to each user as more nodes are added. Accordingly, the network now with more SPV client users is more valuable to bitcoin purchasers than was the same network back in April at $339 on Bitstamp.

Do you rent your lodging now? Just curious.

The rise in popularity of SPV clients with hierarchical deterministic wallets using change addresses has nothing to do with it?


Or it could be very profitable as well too and has nothing to do with this discussion.

The number of unique daily addresses used does measure a degree of economic activity, making it a fundamental measurement rather than a technical trading measurement. The amount of new money coming in is unfortunately proprietary information kept by exchanges.

The importance of the two fundamental indicators of adjusted transaction quantity and daily unique addresses, as calculated by Blockchain.info, is that there is a good fit between the square of these fundamental indicators and the bitcoin price. We may be witnessing Metcalfe's Law of network effects unfolding before us. Thanks to Peter R whose charts appear here.

And by the way, you might explain whether you are serious about your byline "Sell your house to short BTC". Short position margin calls at Bitfinex could be ruinous if you are all-in.

bottom was last April @339

A higher number of new addresses being used isn't a measurement of new money coming in...

We won't know wether we are on bottom or not until we re-rise to the same level before the fall, or we fall to another botTOM.

That 350 on btc-e was not a bottom, it was some whale panic dump. Say otherwise would be the same to say we tested the 100's due to the Mr102

Bottom was $340...exactly as Risto said it was.

We won't go lower than $340.

My vote is for a bottom at either 440 or 400... I think it's lookout below if those are breached on volume.

So, analyzing the current situation... Who thinks we've reached a bottom and are now back on our way up? I think it is much too early to tell and we may very well re-test the $350s I hope we don't go below that, though...

Lets go for the complete the complete quote, if you dont mind.
You know what this reminds me off?

Those two quotes are very similiar. Since not anyone without a basic understanding of ecomics may realise that, i will break it down into fragments.
Fact. (Didnt check but will assume it is correct). Wood burns.
Fact. (Didnt check but sounds reasonable). Ducks float on water.
Suggestion. Bitcoin is a witch (or its worth whatever).
The timeframe (year) is arbitraly chosen. This completely ignores a very fundamental factor, namely velocity.
Most people dont buy gasoline once a year, probably, on average, closer to once a week.
In other words, the same BTC spent on gasoline would be available again next week. So it would be reasonable to divide those 234B$ by 52 and get something like 661$ per bitcoin.

You know what that kind of advertisement you linked is called. Suggestive. It combines facts with implied results that dont follow commonly accepted (in the relative field) theories. And would probably even be illegal in quite a few EU states.

And i´m not even starting a discussion about those 100% could even reasonably be achieved. I mean, several CC companies would like a share of transaction values. PayPal, Apple, "good ol" fiat, whatever.
I mean, seriously, how do you expect this 100% to happen?
Guy goes to gas station, knocks his smartphone at the nfc chip, coinbase (or whoever) automaticly deducts the fiat value from his account after typing a pin and transfers the btc to whomever? Now BitPay (or whoever accepts zero conf transfers) sends a message to the gas station that everything is ok?

Hmm, actually, in that case velocity may be much higher. I mean, if people just transfer fiat to their personal favorite exchange (coinbase, whatever) and just buy auto-buy BTC for transfers (you avoid price fluctuations after all) those BTC are only "bound" by the network until enough confirmation have been recieved to sell them again on market (thats what pament processors do).
Lets consider a safety period of 60 confirmations (thats a lot more than is resonable, but hey, arbitrage bots will transfer from exchanges etc.. so lets go with this figure for now).
That would be like 10h on average. So lets see what $234B/year actually amounts to when we consider the payment is "bound" for 10h. Thats just 380M. A market cap of 380M would be sufficent to facilitate all gasoline purchases if the velocity is high enough. And considering BTC value as a pure payment system that would hold true. In that case a BTC value of $40 would be sufficient to accomondate all gasoline purchases in the US.


Edit:Several typos.

Here is the Blockchain.info chart for the number of daily unique addresses appearing in transactions, smoothed with a 7-day moving average. It also suggests, given that recent numbers are similar to those in March, that the bottom is behind us. I do not watch this data series as much, as perhaps gambling transactions are not filtered out.

Here is the adjusted number of daily transactions, smoothed with a 7-day moving average as calculated by Blockchain.info. Note that recent volume is above March levels, which suggests the bottom is behind us. I am closely watching this data series.

Here is a close up view of a three-day resolution chart using Bitstamp prices. The top resistance line goes back to the November 2013 peak. The bottom support line touches only two candles in that same period. I am watching this pattern unfold. I hope that prices reverse and break through the resistance, e.g. a price above $560 now, or a price above $500 at the end of October. I am buying bitcoin only once a month now, conserving petty cash for infrastructure when I launch my coin.

I see a bottom at 430, does this look accurate?

I have a silly favorite too, but exactly why does mine seem more convincing? It is because the logic of induction in this context has a sound connection to fundamental principles, and there is a reasonable upper bound on the scope, i.e. 100% dead, not 200% dead.