rpietila Wall Observer - the Quality TA Thread ;) - page 291.

Peter R

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Quote from: SlipperySlope on March 24, 2014, 11:07:03 PM

There could well be a disconnect from Metcalfe's Law beyond four more years. In say 8 more years, when the quantity of Bitcoin transactions exceed the current quantity of bank card transactions, I find the predicted bitcoin price value of 57 billion USD per bitcoin implausible.

Lol, I was doing the same math earlier today while jogging.

I came to a similar conclusion: we may see up to ~4 more years of growth following Metcalfe's law, putting us at a Metcalfe Value near $50,000 / coin and near 1% market saturation. At some point we must diverge from V~N² growth, otherwise the price projections get ridiculous like you just pointed out.

chriswilmer

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Quote from: Peter R on March 24, 2014, 11:05:17 PM

Quote from: chriswilmer on March 24, 2014, 10:34:44 PM

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers. We need to found J Bitcoin. This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise. It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

Yeah, I've been pestering my academic colleagues in economics (I am myself a prof. of chemical engineering) to publish a paper that addresses something to do with Bitcoin... but they either laugh or take the idea seriously, but the serious ideas they will consider is how to prove that Bitcoin is a bubble Sad

*sigh*

As a chemical engineer, I am interested in potentially applying some of the rigorous powerplant optimization methodology to a large-scale Bitcoin mining operation and publish a paper on that.

SlipperySlope

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Stephen Reed

Quote from: Peter R on March 24, 2014, 10:04:31 PM

This is showing more than exponential growth. It is showing that a 10X increase in market cap is correlated with a Sqrt(10)X increase in N, i.e., we are witnessing the economic realization of Metcalfe's Law. For the last four years, a 316% increase in N has corresponded with a 1,000% increase in market cap.

A simply stunning discovery and insight.

It seems quite plausible that bitcoin transaction growth will continue at this rate for at least a few more years as current payment transaction infrastructure is disrupted. For example, in three years time 3.2x annual transaction growth would be only 2 million Bitcoin transactions per day correlating to a bitcoin price 1000x higher than today. Two million daily bitcoin transactions is not much compared to the current 212 million daily Visa transactions.

There could well be a disconnect from Metcalfe's Law beyond four more years. In say 8 more years, when the quantity of Bitcoin transactions exceed the current quantity of bank card transactions, I find the predicted bitcoin price value of 57 billion USD per bitcoin implausible.

Peter R

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Quote from: chriswilmer on March 24, 2014, 10:34:44 PM

This would make for a great academic paper!

I'm starting to think there is a lot of low-hanging fruit that would make interesting research papers. We need to found J Bitcoin. This forum is useful for brainstorming and vetting ideas, but I think a lot of good work gets lost and forgotten in the noise. It would be useful to publish highly-polished peer-reviewed manuscripts in an archival format accessible to everyone.

chriswilmer

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This would make for a great academic paper!

chriswilmer

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OK, I'm convinced!!!

Thanks for making the plot Peter!

Peter R

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Quote from: chriswilmer on March 24, 2014, 09:37:38 PM

I think it's relatively easy to find these seemingly insightful correlations among Bitcoin metrics... since the userbase is growing exponentially, pretty much everything about Bitcoin is increasing exponentially as well. Not saying this use of Metcalfe's law is a waste of time, just that it shouldn't be so surprising that it works so well.

This is showing more than exponential growth. It is showing that a 10X increase in market cap is correlated with a Sqrt(10)X increase in N, i.e., we are witnessing the economic realization of Metcalfe's Law. For the last four years, a 316% increase in N has corresponded with a 1,000% increase in market cap.

If you plot market cap vs N the fit is not nearly as good (see below). The price diverges by an order of magnitude at both sides, where the Metcalfe model is fairly accurate over more than 4 decades of market cap growth!

chriswilmer

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I think it's relatively easy to find these seemingly insightful correlations among Bitcoin metrics... since the userbase is growing exponentially, pretty much everything about Bitcoin is increasing exponentially as well. Not saying this use of Metcalfe's law is a waste of time, just that it shouldn't be so surprising that it works so well.

Peter R

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Quote from: dnaleor on March 24, 2014, 08:50:10 PM

just a small thing: I guess you need to multiply the price of a bitcoin with the number of coins.
The value of a network is the market cap, I suppose...

If you do that, I guess the large "spread" at the left side in the chart will become smaller.

Good idea dnaleor. The fit between Metcalfe Value and market cap is better than the fit to bitcoin price for the early days. It also seems like number of transactions per day (excluding popular addresses) fits the left side better than unique addresses used per day:

dnaleor

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Quote from: Peter R on March 24, 2014, 07:07:22 PM

Here is an improved graph of the bitcoin price history versus the Metcalfe value. I am now using the price history from bitcoinaverage.com (giving me post-Gox prices as well), and I am using both the number of transactions per day (excluding popular addresses) and the number of unique bitcoin addresses used per day as the N in Metcalfe's Law : V ~ N^{2 .}

I would like to do a proper regression to get a numerical model, but the blockchain.info charts currently have holes in the data (the large spikes visible on the curves) that render such a processes useless. For the time being then, I've just eyeballed the fits as you see below.

The current price of bitcoin is slightly higher than its Metcalfe value. However, should the network continue to grow at its historical rate of 3.2X per year, the Metcalfe value should exceed the current bitcoin price later this spring.

just a small thing: I guess you need to multiply the price of a bitcoin with the number of coins.
The value of a network is the market cap, I suppose...

If you do that, I guess the large "spread" at the left side in the chart will become smaller.

Peter R

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Here is an improved graph of the bitcoin price history versus the Metcalfe value. I am now using the price history from bitcoinaverage.com (giving me post-Gox prices as well), and I am using both the number of transactions per day (excluding popular addresses) and the number of unique bitcoin addresses used per day as the N in Metcalfe's Law : V ~ N^{2 .}

I would like to do a proper regression to get a numerical model, but the blockchain.info charts currently have holes in the data (the large spikes visible on the curves) that render such a processes useless. For the time being then, I've just eyeballed the fits as you see below.

The current price of bitcoin is slightly higher than its Metcalfe value. However, should the network continue to grow at its historical rate of 3.2X per year, the Metcalfe value should exceed the current bitcoin price later this spring.

chessnut

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Why is it so hard to understand that fundamentals and TA are both significant?

so we know Bitcoin is fantatic, love it, great fundamentals. but have we been beaten to the scene? is it in a bubble? is there a large unknown seller in the market? what is the subjective value of a bitcoin? what is the rate of growth? those are questions that Fundamental analysis cannot answer easily on its own.

windjc

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Quote from: N12 on March 24, 2014, 06:20:11 PM

Quote from: windjc on March 24, 2014, 06:16:27 PM

Quote from: ?? on ??

Quote from: windjc on March 24, 2014, 04:44:22 AM

Right, TA is better than FA because bitcoin is a stock. Or a commodity. Or a stock. Or a commodity. Not a technology. Got it.

BTC is a currency. Bitcoin is a technology.

Charts show you what is going on regardless of what you trade, currency/commodity/stock/etc makes no difference.

What was your point again (if you have one)?

My point is obvious. Stocks and commodities do not grow exponentially.

So you think Bitcoin is the only thing in the world where you can draw straight lines on a log chart?

Nope. Not at all. But I do think that Bitcoin continues to surprise typical traders with its violent upswings. Going down, it all seems to make sense to them. Bottoms and tops, not so much.

N12

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Quote from: windjc on March 24, 2014, 06:16:27 PM

Quote from: ?? on ??

Quote from: windjc on March 24, 2014, 04:44:22 AM

Right, TA is better than FA because bitcoin is a stock. Or a commodity. Or a stock. Or a commodity. Not a technology. Got it.

BTC is a currency. Bitcoin is a technology.

Charts show you what is going on regardless of what you trade, currency/commodity/stock/etc makes no difference.

What was your point again (if you have one)?

My point is obvious. Stocks and commodities do not grow exponentially.

So you think Bitcoin is the only thing in the world where you can draw straight lines on a log chart?

windjc

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Quote from: ?? on ??

Quote from: windjc on March 24, 2014, 04:44:22 AM

Right, TA is better than FA because bitcoin is a stock. Or a commodity. Or a stock. Or a commodity. Not a technology. Got it.

BTC is a currency. Bitcoin is a technology.

Charts show you what is going on regardless of what you trade, currency/commodity/stock/etc makes no difference.

What was your point again (if you have one)?

My point is obvious. Stocks and commodities do not grow exponentially.

Peter R

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Quote from: Biodom on March 24, 2014, 05:20:38 PM

Quote from: Peter R on March 24, 2014, 03:47:36 PM

Quote from: SlipperySlope on March 24, 2014, 03:42:09 PM

Awesome chart that well illustrates your discovery. May I refer to it in my logistics model thread?

Thanks for the compliment! I've been meaning to check this relationship out for months. Only took me 15 min lol. Yes, please feel free to use it however you like.

Very nice charts, indeed, but they suggest current fair value of $70-300 Sad

The N log N chart suggests a low value, but the Metcalfe Value chart (N^2) would be near $500 now. Also note this is MtGox price data and only includes data to February 5, 2014. The Metcalfe value has been growing for another month and a half.

I should do some nicer plots where I merge the MtGox (past) price with the BitStamp (current) price so that we can track the Metcalfe Value in real time. I should also include the calendar date so that it is less confusing!

Biodom

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Quote from: Peter R on March 24, 2014, 03:47:36 PM

Quote from: SlipperySlope on March 24, 2014, 03:42:09 PM

Awesome chart that well illustrates your discovery. May I refer to it in my logistics model thread?

Thanks for the compliment! I've been meaning to check this relationship out for months. Only took me 15 min lol. Yes, please feel free to use it however you like.

Very nice charts, indeed, but they suggest current fair value of $70-300 Sad

SlipperySlope

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Stephen Reed

Quote from: chessnut on March 24, 2014, 04:45:55 PM

....Last night bitcoin went up..... while the stock market went down.

Roll Eyes

There does appear to be a rally developing which can be clearly seen on the Huobi and Bitstamp one hour charts. Support held at $550.

chessnut

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....Last night bitcoin went up..... while the stock market went down.

Roll Eyes

Queeq

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Quote from: Peter R on March 24, 2014, 04:28:06 PM

Quote from: Queeq on March 24, 2014, 04:24:19 PM

I don't think that number of transaction depicts adoption rate. It is a boom of altcoins now and they are mostly traded with BTC. So there are lots of them moving back and forth inside and between the exchanges.

I'd like to repeat this analysis with more observable variables that could be proxies for the N in Metcalfe's Law. I think number of bitcoin addresses used per day, and number of blockchain.info wallets are both decent proxies as well.

In your opinion, what is the most accurate way to estimate N?

I'm not sure it exists. It should be something that is connected only to the amount of new fiat flowing into cryptocoins. And even that does not necessarily correlate with adoption rate.

Topic: rpietila Wall Observer - the Quality TA Thread ;) - page 291. (Read 907212 times)