Topic: rpietila Wall Observer - the Quality TA Thread ;) - page 259. (Read 907227 times)

I am hoping to compute the cross-correlation function between number of transactions, N, and price when I get some more time. However, it is already clear that at least at the "peaks," N is a lagging indicator.  If you zoom into the Metcalfe Value graph, you'll see that N increases for a while after each peak in market cap.  I think this makes sense because people continue to furiously send coins to the exchanges to dump!

I believe in the bigger picture, there is no clear leader or lagger.  If price increases, then this attracts media attention bringing in new users (causing an increase in N).  If the bitcoin economy grows (N increases organically), then I think we expect this to cause an increase in price based on the quantity theory of money (since we are growing the bitcoin economy).  

EDIT: but still N seems to increase with less volatility than price.  It appears more consistently straight on a log chart.  
  

I don't think it matters.  As long as the % of economic transactions to non-economic transactions remains relatively stable, I don't see why the absolute number matters (and we can't calculate it anyways).  

Yes I guess you have superior intellect , but our points of view depend on what square on the chessboard you and I think bitcoin is.

Guys, he has an IQ of 150. He must be right.

Why do you keep claiming that?

https://blockchain.info/pools

No pool is close to 50%.

creekbore, I told you bull trap.   (sounds like "bull crap" hehe)

RAJSALLIN did you see me flinch as price headed back up. I told you price is going lower. Because I know something everyone else hasn't figured out yet.

Yes, I believe so.  The velocity V shows how many bitcoins are sloshing around per year, therefore able to pay for economic activity.  The way I see it, if V decreases and N (number of TXs per day excluding popular addresses) increases, then this suggests both that people are increasingly using bitcoin as a store of value and that the underlying bitcoin economy is growing.  I think this would be healthy at bitcoin's current stage of evolution.    

The problem I see with my graph however, is that it relies on the estimated transaction volume form blockchain.info to calculate V.  Blockchain.info attempts to subtract of "change" and may not always do this properly.  Also, blockchain.info cannot discriminate between internal transfers (a user moving his money around) and external transfers (transfers for goods or services).    

Peter frames the Q.T.M. as if Bitcoin's economy is a consumer market. Rather as he admits, the economy is primarily a speculation (and not even a fixed capital investment, i.e. NAV) economy at this time.

In a speculation economy, the variables in the QTM have different meanings roughly as follows:

M = total number of shares in circulation
V = total perceived future volume of bitcoin transactions per year / total number of bitcoin shares in circulation
P = price levels measured in shares
Q = supply of potential to increase future transactions

Re-reading my debate with Aminorex with the above definitions in mind will make it more clear.


You surely meant to write proportional to the relative (a.k.a. unit) volume (volume / shares).


Because you are not measuring the correct V. Whereas the proxy for V is the number of unique addresses and goods+services accepting and operating with BTC are a proxy for Q, because that correlates to the Metcalf Law value potential. Speculation is all about valuation.


Backwards. The more distributed, the more spending. That is why money is power-law distributed. See my citation upthread of a research paper proving that.


Seems you are attempting to conflate the tiny consumer economy QTM with the dominant speculation economy QTM.

@ slipperyslope, peter r

do you think transaction volume is largely a lagging indicator?  

how much emphasis should we place on coin trade when viewing the correlation between transaction volume and price, or does the exclusion of popular addresses nullify this by disregarding exchanges for the most part?  still in that case, how do we determine how much of that volume belongs to personal exchanges of btc/fiat?

I am watching both Huobi and Bitstamp on Bitcoin Wisdom. The Chinese are driving prices lower and Bitstamp is following. It has been reported that certain exchanges have indeed been notified by their respective banks that accounts used to receive customer deposits must be closed.

On Bitstamp, the price is currently $431.76 which is a lower low than a few days ago. Big red candle on the 6 hour chart. I am on my way to the local Robocoin ATM to put a few more fiat bills into it.

Volume is till not acceptable, a busy day with only 27K at Bitstamp, I am afraid we will go even lower...

Thanks to you all, I have a better understanding of the theoretical relationship between bitcoin transaction quantity and price. Consequently, I have started watching even more closely the Blockchain.info chart that best illustrates the recent data.

Note that reported transaction quantity has been declining starting in March. I wonder which data series will reverse trend upwards first - transaction quantity or price?

Perhaps watch again and note the example about the doubling of grain of wheat on each square of the chessboard. It works out to more wheat than has ever been harvested in the history of mankind.

This shows that humans don't comprehend that exponential growth can't continue unabated, and the large things must grow more slowly.

When they see huge nominals ahead, they think this means exponential rate of growth hasn't slowed, because humans only pay attention to nominal size not to (de-)acceleration.

You see that is an example of difference between our abilities or acumen. I can extract the generative essence (model) which has nothing to do with direction (deceleration or acceleration). The essence is humans don't correlate properly nominal size with exponential rate in any direction.

I have thought about the proportion of transacting bitcoins vs the held-in-storage bitcoins. Coinbase reported that approximately 80% of their customers were buy-and-hold. The proportion I think is important when trying to figure out a maximum value of bitcoin. But your graph neatly sidesteps the issue because the shape of the function is independent of any consistent adjustment of the bitcoin quantity available for transactions. Right?

I love that video- one of my 1st that "awakened" me  but it's the wrong example.  The human race failing with exponential function is in UNDER estimating the speed of growth.

Despite all the posts about why Bitcoin adoption can still be huge doesn't change the fact that larger things grow more slowly. Yes it can become nominally more huge than now, but the rate of adoption still declining. The greatest failing of the human race is inability to mistake nominal growth for constant rate of growth.

I strongly urge every reader to expend the time to watch the first 6 minutes of the following video. It will be the wisest 6 minutes you ever expended.

“The greatest shortcoming of the human race is our inability to understand the exponential function.” - Albert Bartlett

I wanted to dip my toe into the Aminorex / AnonyMint debate.

Like Aminorex pointed out, we must be careful with our units.  When applying the Quantity Theory of Money equation (MV=PQ) to bitcoin, one must measure everything in bitcoins.  I believe it is reasonable to assume:

M = total number of bitcoins is circulation
V = total volume of bitcoin transactions per year / total number of bitcoins in circulation
P = price levels measured in bitcoins
Q = economic output (per year)

So, the velocity of money for bitcoin is not going to be proportional to the number of transactions per day.  Instead it will be proportional to the volume of bitcoin transactions per day.  Below is the plot I get for the yearly velocity of money for bitcoin.  Velocity has been decreasing over the last year, which I believe makes sense.  Bitcoin's primary use is a store of value so as the coins become distributed across the population more efficiently, I believe it is reasonable to expect aggregate behaviour to increasingly favour holding to spending.  

This means that price levels P must decrease to an extent greater than economic output Q increases.  In other words, due to the store-of-value property of bitcoin, and based on empirical data over the last year, the price of bitcoin against a stable currency should increase at a rate faster than bitcoin's underlying economy.  

So many people claim they would never risk "putting their money into it", and yet the market for gambling and lottery tickets is perhaps more healthy than ever. People actually experiencing those they know personally "getting lucky" or "winning big" on bitcoin will draw in this gambling crowd via catharsis. And that's bigger than 2-5% of a population. Maybe they'll have more propensity to realise the "winnings" as cash, but that will likely just smooth out price volatility.

All it takes is making bitcoin available in small change amounts with coverage somewhere approaching that of lottery ticket vendors. And as you're pointing out Peter, that's on it's way.

That's not really true either.

If you are buying something tiny as a one-time transaction, perhaps, but credit cards are even worse.

For metered microtransactions (where you are buying many kilobytes of internet bandwidth for example, or gasoline), bitcoin works fine, see bitcoinj's implementation.

Yes indeed, a merchant is now also not going to wait until he actually receives the payment on his bank account. So why would he wait until he receives it in his wallet? It is faster then fiat.

This is repeated over and over and it's wrong.

There's no problem whatsoever with accepting a zero-confirmation transaction for a cup of coffee.  After a few seconds there is very little chance of a double spend.  There's no way anyone is going to attempt to steal a cup of coffee, when the odds are very high they will get caught.