Always been confused by this and maybe someone can help.
How will bitcoin get to a high price if it can't do big jumps in price?
Surely slow and steady will take us tens and tens of years.
How can 10k (for example) be even remotely realistic any time soon?
Not trolling, just wondering your thoughts.
This is a good question, one that I have been thinking about.
Vinny Lingham predicts a slow and steady rise to 2k-3k during 2017. His judgement seems as good as anyone's to me. But I agree there's no way in hell we're gonna go slow and steady to 100k, or even 10k. And yes I'm thinking in log axis. Suppose price multiplies by 2.5 x per year. Five years of that would get us to 100k. But can you imagine that actually happening? Once that pattern establishes itself, someone who thinks in terms of years is gonna try to frontrun it and will be willing to buy at a premium, short term traders will see that happening, the price will go parabolic, everyone will know it's day traders responsible for the short term parabolic rise and will try to front-run them cashing out, big crash, and there you have it. So if it's truly going to the moon, I think it's safe to assume that it will be a volatile ride all the way to the top.
Hmm, that gives me an idea on how to model the magnitude of the swings. If you knew how many speculators there are (in terms of how much capital they are working with) and what time frames they are working in (long term investors or "long-termers," minute to minute day traders of "short-termers," and everything in between), and the first people to go long are the long-termers and the last to go long are the short term day traders, with the in between being the in between, then the parabolic rise ends when the progression from long termers to short termers runs out.
I've been thinking about this too. The moment the market becomes predictable ("it will go to 2k-4k-10k"), it's the exact same moment that someone can front run the legitimate non leveraged buyers - making their purchases much harder (while the leveraged trader gets all the money). From that perspective, some uncertainty with periodic dips is a good thing.
I don't know if I would call it good or bad ... merely inevitable.
Or I suppose what you are saying is that a certain degree of uncertainty is to be expected in a properly functioning market, and is therefore evidence of a properly functioning market. So if we went through a period without the volatility .... that would be a bad thing? hmmm. just thinking out loud.
I wonder if there's a way to calculate what the "expected" amount of volatility should be. I've often wondered whether that might be related to the average spread on the exchanges: smaller spread would enable profitable trading on higher frequency, lower amplitude swings, which in turn would allow (by the reasoning above) parabolic swings to go steeper +/- higher before they burst ...
OK, I got it.
1) Quantify the average spread on the available exchanges.
2) Derive a formula that allows you to calculate the expected volatility based on average spread.
3) Profit.
Lol. Not sure how to profit on that yet ...
Volatility comes from a variety of factors, and not merely the spread of prices between exchanges.
In the case of bitcoin, a small market cap has a lot to do with an ability to push it around, and the fact that it is a paradigm shifting innovation makes for additional difficulties discovering the price and measuring adoption present value and future value. Furthermore we have speculation and momentum, too and even manipulation in both directions and new tools to short.. and various FUD, etc etc..
