Topic: rpietila Wall Observer - the Quality TA Thread ;) - page 261. (Read 907212 times)

Take a look at this fractal:



It compares
the bubbles of Oct2010 + Jan2011 + April-May2011
vs
the bubbles of Jan-Mar2013 + Nov2013 + May-Sept2014?

The top of the next bubble would peak around 100,000 USD/XBT at around end of September 2014 (6 months from now).


Edited: dates corrected (prebubbles were in 2010, not in 2011, and superbubble was in 2011, not in 2012)

Please cite a reference which says as demand (bids) increases, the float decreases? I have never seen such a claim. Rather as demand increases supply of float (asks) also increases to match it, but at a higher price. The supply increases faster than the demand because investors have larger and larger gains, this is why marginal price doesn't grow to the edge of the universe. The same is true in production, where the price won't go to infinity because new producers will come online to serve higher demand at higher marginal prices.

I scored in the high 90s (out of 100) in my Economics 101 university class, but I didn't major in Economics and that was 30 years ago. I renewed my interest in Economics starting around 2005. For interim decades I was doing only computer science and programming (and wasteful mischief which I am suffering from now).


Or it increases P x Q.

V has been falling since 2008 and M was increased by the Fed in order to keep P x Q propped up, but that was not a free market event and after 2016 P x Q is going to come crashing down because M is mostly debt and thus we have massive P x Q oversupply in the global economy.


You got that backwards.

Increasing the V that doesn't need to convert to/from fiat doesn't necessarily decrease the fiat price of BTC. It may decrease the supply of BTC that wants to sell for fiat, while increasing the demand for BTC of those who hold fiat, because there are more network effects within the Bitcoin ecosystem that they want to avail of.


That is irrelevant as I have explained. What it does is reduce the network effects (merchants accepting and holding Bitcoin thus being nodes in the Metcalf law valuation) within the Bitcoin ecosystem that those holding fiat must buy BTC to attain. If everything they can buy with BTC they can also buy with fiat, then there is no great need to buy BTC with their fiat.

That was precisely my point about why lose 3-5% on double exchange, when one can just buy with their credit card for 0%.

Sorry you really dropped the logic on this one.

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Bingo!

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What clearly was that?


Arbitrary curve fitting again presented as uber confident analysis.

An interesting development - LTC/BTC for the first time in a while is trending DOWN in a bitcoin bullrun.

I think this is a fundamental shift that we all expected.

if LTC increases at a rate of 2^2, and bitcoin at 3^2, this is obviously what we would expect to see in a genuine bull run driven by fundamentals.

A wise move would be to short (using BTC) the LTCBTC pair on Bitfinex. this will mean full exposure to the BTC bull run as well as exposure to LTC inferior fundamentals.

Apologies I was intending to make following correction and then we had a brown out and I fell asleep.



The red line below is a power law distribution for B=0.5 which you can see above is the value of B I fitted.



What that distribution says is that the rich hold most of the percentage of wealth, which we know is in fact always true. And the fitting of the cumulative distribution function to BTC price is the theoretical claim that earlier adopters will be more wealthy (by now) than later ones.

The research I cited points out is that the masses use money as a unit-of-exchange, not as a store-of-value.

However does the Metcalf's law value of money (which Peter R has shown BTC mcap and thus price is tracking) where the value is proportional to the square of the number of nodes in the network nullify my use of a power law distribution? I.e. do the wealthy not create (proportional to their wealth) more network nodes (e.g. unique active BTC addresses) than the masses?

I see the really diehard power users (e.g. SlipperySlope and Peter R) are both talking about creating a new node every day. Thus this anecdotally supports that the power law distribution applies correctly here.

Thus I think we need to take this theory seriously. It might be the correct growth curve. The linear one with a least squares fit seems really out-of-touch with historical data. It totally ignores the shape of the earliest adoption curve up to July 2011. Risto's explanation was the early adopters were bad speculators and bid the price up too much, but my interpretation is they are the most wealthy now and they were the most powerful because they are early adopters. The least squares fitting of a line to a curved adoption could possibly be (confirmation bias in play as) an (emotional "to the moon") attempt to force a linear projection on a growth curve which obviously was not always linear. Has it become linear since January 2012?

I very much doubt it!

Convince me? Risto how do you analytically defend your linear least squares fit that makes you so sure of everything and gives you the audacity to browbeat all the bears?

Add: why don't stocks follow this log-logistic curve? Maybe they do (?), if we don't compress the early adopters into a single event IPO. Also can a stock issue have network effects, i.e. does Metcalf's law apply to company shares? Seems to me yes if the shareholders network amongst themselves, but much less so than a network of money holders.

Add: Fact is the slope during the runup to July 2011 was 0.33 per month. Since Jan 2012, it has been 1/4 of that 0.08 roughly. Why should we expect the slope to not decline again? Why should the pace of adoption remain constant? Seems intuitively unlikely to me. Pace of adoption should slow as we slog into the less astute demographics. Larger mass with more inertia grows more slowly than smaller mass with nimble inertia.

I would check that I don't buy immediately after an intraday $20 jump but in general the answer is: YES.

If you had an amount waiting to be invested in BTC, would you invest 100% of it right now or try to go by bits and cost-average for the case of a new bottom lower ?

I want some of that stuff that makes you think clearly 

Quick TA update:
- 6H candle color/volume: one green with high volume, awaiting for more which confirms the bottom of March 31, conclusion: hopeful
- Bid/ask strengh at market: slippage to sell 5k: $32, slippage to buy: $98, conclusion: explosive upside potential
- Trendline comparison: we are now at -0.291 log units. The trendline is at $932 and rising $7 per day, conclusion: rock bottom
- Sentiment: last week was quite extreme in fear, fud and bearishness, conclusion: supports that the bottom is behind us, deceitful
- Prognosis: intact from yesterday

I will perhaps start to publish a "rpietila we will hit $X never again" indicator, which is my tender for a binary bet where I take the side that it will "never" go that low again (in practice like 3-6 months because I want to collect the winnings). That allows the "pay up or shut up" commenters to actually pay up if they thing bitcoin is going down and not ridicule. Similarly if I'm bearish myself, I could start to offer bet that "it will certainly go that low".

I need to check the legal structuring and don't anticipate to actually make many bets but a number gives more accountability than hazy predictions.

Well anyway today I am about to play Dominion whole day with my friend and tomorrow go to the castle where I close all connections and just enjoy the countryside and the planning meetings with county officials, building managers and such.

looks like up tonight.

Actually afaik gyft owner keeps a certain % not converted.

One of the ways I spend bitcoin is to buy gift cards from Gyft or Giftcard Zen. Unfortunately the coins get converted into fiat right away and my subsequent use of the gift card at, for example, Amazon does not add to the Bitcoin economy. I expect that as the Bitcoin economy grows, business to business bitcoin transactions will also grow enough to keep the flow going once a merchant receives my coin.

I want a Klein bottle.  There is a stock of 1000 waiwai on the wampum market.  It is not moving.  It is bidless.  But they travel well by air, so I take one waiwai from the stock, by buying it on the market.  The market moves against me.  I.e. the value of one waiwai increases.  I sent one waiwai to Alice by European swallow to pay for a Klein bottle.  Alice wants wampum, so she sells the waiwai on the wampum/waiwai market.  The market moves against her.  I.e. the value of one waiwai decreases.  Net impact on waiwai/wampum: Zen.

Youtube videos of my Klein bottle go viral.  1100 teenage girls in Uruguay want Klein bottles, at various times, 100 each day.  As more and more school girls trade wampum for waiwai, the stock of waiwai declines, the cost in wampum increases.  100 waiwai are held by pidgeons.  Alice takes the waiwai from the pidgeons and sells them for wampum the next day, but by that time 100 more Uruguayan school girls have pidgeons in the air.  For 11 days, the stock of waiwai on the wampum market is reduced by 10%.  Uruguayans 101 to 1100 pay 20% more for the waiwai, and Alice gets 118% as much wampum for her Klein bottles as she would have were the waiwai rates constant.  If Alice's ten cousins start marketing their Klein bottles to Moldovan gigolos, whose pidgeons are twice as slow, those transactions will remove twenty times as much waiwai from the supply/demand balance on the wampum markets, and the price will rise confoundedly.   The result will be a waiwai bubble.

PQ=MV, the value of the money stock is M, denominated in PQ/V.  Increasing V decreases M.  Increasing the number of times a waiwai can flip during a fortnight, say by using African swallows instead of pidgeons, will increase laden air speed, thus decreasing the wampum per waiwai.

Using bitpay keeps BTC in the air.  That creates a churning marginal demand which decreases the supply on the fiat market.  If you buy immediately before spending, and the merchant takes fiat, then the time in the air is small.  If you buy in anticipation, V decreases, and the effective air time, from the point of view of the exchange market, is quite long.  Using bitpay also adds to the bid and to the ask on the market, thus increasing liquidity, which in turn makes bitcoin marginally more efficient (less slippage) and less risky (as liquidity is available when it is needed).

If everyone makes a different color of Klein bottle, and everyone wants to collect the whole set, then there are N^2 pidgeon flights which need to occur.  The first pidgeon reduced the stock of waiwai by a factor of 0.999.  The second person, by a factor of 0.998,  the n^2 person by a factor of 1-0.001*n^2.  As a result the cost of a waiwai rises by a factor of k*e^(n^2).

Most of you can't picture in your head as I (and some others here probably) can, so I need to show you chart for you to get that "Ah ha" epiphany.

I lack the math software to do a proper log-logistic curve fit. Here follows my eyeballing and rough fit to the change in slope.

The run from Oct to Jul 2011 had a slope of 2/7mos and from Jan 2012 to Jan 2014 had a slope of 2/24 mos. The cumulative distribution function shown superimposed in blue below is 1/1+(1/x)^0.5. Thus from x=0 to x=0.25 for the Oct to Jul 2011 run has a slope of 1/1+sqrt(1/0.25) = 1/3 = 0.33 and from Jan 2012 to Jan 2014 is from x=0.25 to x=0.50, thus 1/1+sqrt(1/0.5) = 0.41. So 0.33-0 = 0.33 and 0.41 - 0.33 = 0.08. And 0.33/0.08 = 4 and 24/7 = 3.5. So we can see ratios of the slopes match closely. So this is a reasonable curve fit as the proportional vertical heights also match. A quantitative fit would be more accurate. The accurate fit is probably a bit less steep in the early portion and less flat in the latter. So this would be more favorable than the one I overlaid.

Any way, if this theory is correct, then you can clearly see that Bitcoin will stop rising as fast and that it is due to fall down in price significantly before it rises again and more slowly than the past. From here on the slope from x = 1 to x = 1.5 is only 0.05, thus 5/8 of the rate of increase we've on the log 10 chart since Jan 2012. Note that is 5/8 of a rate of increase that is exponential in the power of 10.

It is roughly saying we won't significantly surpass $1000 in 2014. I don't know where the correctly fitted curve would be right now, so I can't project where the price should be now and where it will be nominally. I think the slope projection is more close to accurate, so we can say that if the theory is correct (that distribution of money holders is a power law distribution as the cited research and common knowledge says it always is), then price appreciation will slow down specifically to 0.05 units on the log 10 chart per month where 1 unit is 10X appreciation. So if we bottom at $400, then price after 20 months should be $4000. Again this is a very rough eyeballed fit and would expect the refined fit to have a slightly higher slope maybe 0.06, so make that 16 months instead.





What is hard to understand? Reed's Law is another way of stating Metcalf's Law. It is quite clear that in a network with N nodes, there arre N^2 possible interconnections. Thus the value of the network interaction is N^2. How hard is it to understand that without communication and interaction, there is no leverage of each other. How can I use your knowledge if I can't interact with you? Why do we become smarter by posting in this forum. Etc..

Yes.  This is what the model implies, and it has reliably held since the opening of MtGox.  Your additional daily transaction adds $174,019.50 of value to the market cap, or $0.013 to each bitcoin.  It seems too simple, but on the other hand I cannot believe that the goodness of fit is just coincidence; is there something truly at play here that we haven't fully come to understand?

I do agree with your assessment that one should try to find ways to use the system in useful ways (like you are doing).  For my part, I will now be looking to hire people in bitcoin space for contract work that I would have normally hired locally--this will increase usage of the network.  
  

And this is why Quantity Theory of Money says M x V = value, not M alone. This is why selling out to fiat via Bitpay robs us of the square of the count of transactions and puts that value in fiat instead. The value of a network is the velocity times the position, not just the position, i.e. if all the actors (hodlers of money or nodes) don't interact then the network is a beautiful pile of do-nothing.

Your model continues to boggle my mind.

I try to perform at least one Bitcoin transaction daily. Either by spending some, buying some, transferring some, or most often by receipt of mining earnings.

Suppose that I am responsible for permanently increasing the daily quantity of transactions by one. Today's adjusted number of transactions reported by Blockchain.info is 58,006, and your model projects a market cap of $1.50 * 58,006 * 58,006 = $5,047,044,054.00. My contribution makes the adjusted number of transactions 58,007, and the corresponding market cap is 5,047,218,073.50. The difference between the two market caps is $174,019.50. As the total number of Bitcoins at the time of writing is 12,591,775, my one incremental daily transaction lifts the corresponding price per bitcoin by 0.013 USD.

Right?

OK, thanks, just explain it in terms for us thickies dwelling in the IQ130s

You really can't wrap your mind around the analogy?

"So in order to stop rapefiat-takeover-of-Bitcoin, first we need to rapefiat-takeover-of-Bitcoin until everyone is rapedhas-fiat-takeover-of-Bitcoin, then we can suddenly stop rapingfiat-takeover-of-Bitcoin because everyone has a rape kitpretends-to-accept-BTC-but-really-accepts-fiat."



How can I say in a nice way that I think you are incredibly naive.



Nope, they gain much more.  So your criticism about losing a few percent on fees is ridiculous.