Topic: Wall Observer BTC/USD - Bitcoin price movement tracking & discussion - page 29174. (Read 26735435 times)

WE are NOT really on different pages, here - even though initially, I got the sense that your question was just meant to provoke and to argue technicalities. 

When posters throw around the term insider trading, frequently, they are NOT really going to know how to argue it or to defend against it in the abstract, and certainly that is likely why you asked for examples.

When posters refer to obvious insider trading in the recent past, they are referring to suspicious buy or sell activity that seems to coincide with prior release of news... for example, prior to GOX closing down, there were some 10k sales... and, also there are probably some other examples of someone who may have found out from a company like GOX that they were going to make an announcement.... which would cause a certain price change in a certain direction.


Surely, no one is claiming that information obtained through a forum or intense research and the creation of inferences would constitute insider trading in the sense that is repugnant to posters.

Even attorneys may NOT necessarily understand the difference between something that is illegal and something that is NOT and be able to define it exactly.

In other words, I think we are getting caught up in technicalities when we want to argue about insider trading that would be repugnant and insider trading that would be acceptable.... certainly, posters here use the term to refer to fraudulent kinds... but may NOT be provable... or easy to trace.. but we get a pretty clear sense that they are happening when coincidentally activity goes up 4 hours before an announcment.

It was a serious question.  The point I was trying to make is that there are no insiders and there are no outsiders.  These terms no longer make sense outside of the legacy financial system.  

Why do you think most people are here on this thread?  They are looking for information to make better trading decisions. If they find it, are you saying that it would be unethical for them to act on it?  


Bitcoin is not a stock.  There's neither insiders nor outsiders, but some people have better information than others.  That's life.  


You are blurring the lines between "using what you've learned to your advantage" and "defrauding your customers."  Only one of these is unethical.  

If I purchase more bitcoins because I think my invention will be useful and strengthen the ecosystem, then I'm taking a risk on what I believe.  If I'm right, then I would call that a just reward.

If someone sells GoxBTC to his customers because only he knows that GoxBTC aren't back by any real BTC and he needs to raise cash, then that is fraud.  

You seem to be getting caught up in technicalities in order to attempt to defend insider trading.. are you a troll?


Obviously, insider trading is term of art and a technical term... yet the kind of thing that laymen understand would be illegal if bitcoin were a stock.  Surely bitcoin is NOT a stock, so sometimes people may begin to believe that it is o.k .to engage in it. 

Certainly, if a person knows about some inside scoop, s/he is going to take advantage of that inside scoop to make a profit.   I think an illegal aspect of insider trading is if someone is put in a position of trust over an entity and then is milking investors by trading on the inside information  and investors pay for that, in the end b/c they do NOT have the inside information.

My feelings ebb and flow regarding the whale/bot manipulations, yet I try to factor it in to my own investment decisions, rather than to become too irritated by it.

Yes, insider trading is quite irritating - and yes, it does seem obviously to be taking place when there are certain large transactions taking place right prior to the release of some major news.

Can you give me an example of who an insider might be?  

Do you consider yourself an insider or an outsider?

If I created something I believed was important for bitcoin and purchased more coins because I thought my invention made bitcoin more valuable, would that be insider trading in your mind?

Maybe but I don't think its very significant. What is more pernicious is the insider trading that has definitely happened a few times recently.

I do NOT have a very sophisticated analysis about why or how it happens exactly; however, I am saying that within parameters, whales and bots are able to move the price enough in one direction or another in order to predict what is going to happen.  When there is low volume, they do NOT need as many coins to manipulate, and when there is high volume they need a lot of coins.  Surely, sometimes,even a whale will NOT be able to move the market b/c s/he cannot completely predict the behavior of other whales, and the sentiment of the masses may cause the price direction to move the opposite of the whales attempted manipulation.    NONETHELESS, the point I was making is that it is my sense that there is quite a bit of manipulation going on, even though it is NOT easy to decipher for sure about what just happened, especially if manipulation is taking place in smaller increments (such as a series of 30 btc at a time or some other random amounts).

Really?   I thought you were expending a fair amount of time and energy in the derision of Bitcoin.


I'm not buying that for a minute.  Graphical models provide a quantitative framework for doing exactly that, in a very useful manner.  There are a variety of methods available to optimize hyperparameters, depending on the structure of the model.  A coherent and principled program will derive incrementally more robust models over successive iterations.  In many cases principled bounds can be placed on error.  I would dearly love to have the time and budget to do this modeling for bitcoin, but alas it has yet to materialize.  Perhaps after July.


You have to discount for volatility, confidence intervals, and over the whole the curve, not merely at a single point in time.  My expected value is very far north of 1k, but that does not mean that immediately going all-in is my optimal strategy.


And if you depend on such subtleties your strategy is not robust.  But one need not depend on such subtleties.


Consider however that your supposed causes may not be the actual causes.  


This is a little bit better, as an analogy, but not a lot better.   Still, I can comment on what factors might determine my answer.  What is the provenance of the claim?  What is the known history of the putative origin?  If the physical characteristics bear out the claim, and the ancestor was demonstrably a hoarder of gold known to have gone dark, and the discoverers incentives were aligned, then I would consider it worthwhile, certainly.  Under many circumstances the probabilities would be difficult to estimate, and my utility function would play a larger role.  Do I enjoy treasure hunting?  Is my time more usefully spent elsewhere?  If I could not form enough confidence in my estimate of the risk/reward, I might pursue or decline the opportunity on purely aesthetic grounds.  

In fact I would personally be very unlikely to ever have the least interest in a treasure map, no matter how well attested.  Bitcoin, on the other hand, is a nearly maniacal obsession.  Because my risk/reward estimates, my confidence margins, and my utility function have conspired to this end.

Very nice post about expected value etc. .  Seems to be generating a lot of reaction, probably because you are touching the core of investment.

The thing is: of which investment DO we know the expected value?  Every investment has its risks.  I'll admit that those risks are way way bigger in the crypto space than for other assets, but I am not aware of any investment with an expected value that is positive in real terms (inflation-adjusted).
For sure, if you prime concern is capital preservement, and you dislike volatility, you might want to stay clear of cryptos (or only allocate a small percentage of your capital).  
But every other investment has its risks too.  Housing is probably one of the safest investments you can do, but its valuation depends on the purchasing power of the citizens, lending practices, political stability, taxing policy and worst-case-scenario: nationalization.  Gold used to be the safe-haven investment, but with cryptos around, that might change.  And while not theoretically guaranteed, I think a long history teaches us that the expected value of fiat is negative, though you typically have low volatility.


Didn't know that expression, but certainly I should have listened to it many times during my life...

Why do you think whales are good at predicting the short term? Or are you saying they can actually move the price themselves? In that case they aren't making a prediction but they will know exactly how much the price will change based on how much btc they buy/sell.

Yes, whales can make easy money, but I'm really skeptical about the importance of whales, unless it is a major holder like Exante or Winklevoss deciding to divest 100k coins in quick time. We saw a 10k sell wall recently and although the short-term impact was noticeable the effect after 24 hours was pretty much gone. It was news driving the volatility at that time, and once the news went quiet the market has reverted to longer-term sentiment.

Actually the fact that investors are only willing to pay $700 at the moment is NOT merely b/c they believe that there is a 1/1000 chance of bitcoin reaching 700,000.  Instead, a large number of investors recognize the price of BTC as a moving target, and s/he would rather buy 7 BTC for $700 rather than 1BTC for $700.    When the price fluctuates so much investors calculate when to get in or to get out based on predictions that are truly difficult to predict - except the whales and the bots have a higher ability to predict the short term and to profit by the short term.. even though bots and whales cannot be certain about long term outcomes.

The efficient market hypothesis would tell us that the best predictor of future price is the current price.  The price is the consensual discounted value.


You can predict the BTC price 5 minutes from now.  The price now is a good approximation.  On that scale any deviation is pretty well characterized as stochastic volatility.

You seem to aver heavily to volatility.  But there is a robust and long established financial theory of volatility.  It has well-understood characteristics, and rational financial decisions are made in the presence of varying degrees of instrument volatility every day.  Bitcoin is not even all that volatile.  Any pre-IPO venture might easily trade shares at integer multiples of the volatility of Bitcoin.  That does not make them bad investments.  The characteristics of the enterprise and the utility metric of the valuer determine whether it is a good investment or a bad one.  

It can be easier to make a useful longer-term prediction than a useful short-term one.  (Your implicit argument seems to assume the opposite.)  In the long-run stochastic volatility just doesn't matter much because fundamental factors dominate, because they persist, while stochastic volatility tends to (1) cancel, and (2) be damped.


Very true.  Estimating the parameters of the valuation model is critical to accurate valuation.  A well-informed actor can make a better estimate than an ill-informed one.  I consider myself reasonably well-educated and well-informed on the subject -- I am paid well to be so -- and have estimated the distributions of these parameters.  I consider Bitcoin to be an excellent investment, in the sense that it's risk/reward characteristics are suited to my utility function.  I suspect that our utility functions differ, but perhaps less than immediate appearances would indicate.


A fair and accurate assessment, I think.  But one can form a Bayesian model which indicates whether or not it is a good investment, under a given utility function.  Again the utility function.  A theme is forming.


I think it is reasonable to believe on the basis of structural characteristics that Bitcoin will be uncorrelated with USD both in the tails in any run and in the center in the long run.  The facile summary for the latter is:  Because inflation.  Uncorrelated instruments are the foundation of modern (and post-modern) portfolio theory.

Your use of "millionaire" is a rhetorical device.  Leaving the rhetoric aside,  observing the correlation of bitcoin fiat value with bitcoin network growth and the persistence of bitcoin network growth is sufficient to demonstrate to any reasonable follower of markets that buying bitcoin is likely to outperform buying the market, for the forseeable future, in a very simple, direct, and obvious statistical sense.  That is very unlike your "crazy lottery".

Your reasoning always seems to start with facts and sound principles and then suddenly take a hard turn into la-la land.  I am becoming hardened in my inference that you have a utility function which is not serving you well.  Utility functions are slippery things, often left unconsidered, unreflected, but with profound impact on outcomes.  I recommend this literature to you.  Read about the utility function in relation to Kelly criterion, exponential discounting, and modern behavioural economics.  Maybe some Taleb, some Ariely, and some Kahneman/Tversky  would do you good.  Certainly Kuznetsov's "Complete Guide to Capital Markets for the Quantitative Professional"  would be a helpful read.

I have a difficult time thinking that any of this gravitation of bitcoin price around 666 is natural... Surely we have momentum that whales and bots cannot control.. but some of these coincidences of gravitations are likely bot/whale manipulated... . Whales can keep us up and keep us down within a range... take for example the sell $700 wall on bitstamp... if the momentum seems too great, then that sell wall will get pulled and put at $720... however, in the meantime, the whale got his way to keep prices below $700 and then to move downward in order that he can buy new BTC at $666 from his $700 sales...

Nice deal for those who have the means to manipulate... I am ONLY resentful to the extent that I do NOT Have those means and that ability, yet if I did have those means and that ability, it is likely that I probably would use that kind of manipulation to make sure and easy money.

If the expected return of bitcoin is positive according to your probabilities, go ahead and invest on it.  I am not trying to talk anyone out of it.

But you cannot honestly tell others that it is a good investment, because you cannot claim that your probabilities are more reliable than mine or than those of that guy over there.

It seems that those investors whose expected value is 1,000 USD or more are very few, and they have run out of money; otherwise they would keep buying BTCs until the price gets over their expectation. 

Therefore, most of the "loaded" traders have expected values less than 700 USD right now.  To get that value they must assign  very small probability to "bitcoin will be eventually worth more than 700,000 dollars".  Specifically, they think that the chances of that happening are less than 1 in 1000. (Even if they do not externalize that probability, it is implicit in their reluctance to pay more than 700$ for one bitcoin.).

But why P = 0.001 and not P = 0.002 or P = 0.00001?  There is no logic or experience that will help one choose between those probabilities.  Yet they lead to very different expected values.   And indeed, in the last two days we saw that the price is pretty random: it can rally by more than 100 USD on a rumor, and remain there after the rumor is proven to be false.

instead of a lottery ticket, a better analogy could be an old piece of paper that someone claims to have found among their great-great-great-great-grandfather, with what appears to be the map of an island with a "X" and a note "three tons of gold buried here".  How much would you pay for such a map?  Is paying 700$ for that map a good investment?

Definitely, I appreciate you discussion of value and predicted value in terms of a lottery ticket; however, with all your smartness, you are certainly missing some essential points about bitcoin.  

First: Bitcoin does NOT need to win the lottery or have some exorbitant pay off in order for it to be of considerable value.  Actually, even if bitcoin maintains its value flat, it is doing a heck of a lot better than the dollar b/c the dollar is inevitably programmed to shrink in value due to dilution (too much expansion of the supply).    

So, you go wrong in a couple of respects regarding your bitcoin/lottery discussion, the first, as referred to above, is the anticipation that some major payoff is needed in order for bitcoin to be successful.  

Second:  The other aspect that you go wrong is to expect that any investment in BTC has to be for a predetermined number of years.  Markets have inevitably shown that investors are capable of playing their investments by ear and to go with the flow with whatever the investors perceive to be best to provide them with an acceptable return. ... and even though at this particular moment, bitcoin may be among the best of the long term crypto-currencies, yet if another and better cryptocurrency comes along, then certainly bitcoin money can be moved into that new and better investment.  So bitcoin does not need to be the best forever, it ONLY needs to be the best for the moment.  That expression .. ."dont let the perfect be the enemy of the good."

667 is the geometric mean of the Stamp ATH and post-ATH low. It is logical for the price to gravitate there now that the gox-shock has faded.

Jorge,

What if the axioms of mathematics that are used to compute EV for bitcoin are not the same as that of a lottery ticket?
In that case its not an apples to apples comparison.

To me, this $800 by the end of the week seems more like a wish of an outcome rather than a prediction of a very likely occurrence.  Surely, bitcoin has been volatile in the preceding months; however, what brought bitcoin into the $500s and then into the $400s within the past couple of weeks was a series of bad news events (china and mt gox and other concerns about bitcoin securty) and likely manipulation(by whales and bots) - yet I remain of the belief that Bitcoin cannot so easily overcome the downward pressure of such negative news and manipulation within the span of the week.

Personally, I DO believe that around this time in bitcoin history $800 would be a comfortable and reasonable floating point for a few weeks while some of the bitcoin news, expansion and network gets sorted out.. including continuing to let the travesty of the Mt. Gox circumstances sink in sufficiently in order that we are able to mourn somewhat before moving on to next higher grounds.  

Certainly, it seems that NONE of us here truly know the direction of bitcoin or have crystal balls - even though some of us here claim to be more omniscient than others.  I certainly cannot predict the irrational aspects and also the exponential growth potential of bitcoin.  Surely I believe that $650 to $750 would be manageable for this week, but likely we will NOT reach any kind of stable $800 ... I do expect also that possibly for a month or three or four  that we will regularly experiencing sub $1000 territory.. until we likely begin to transition past new ATH territory and into the $1500 arena.. for a while.... before going further up.... maybe 2-4k would be reachable by the end of the calendar year.. and maybe 6-8k by the end of 2015... ... of course speculation, to some extent.. but certainly conservative speculation, in my thinking.... so long as bitcoin does NOT become undermined in some major way in the interrim.

How does fiat compare to a lottery ticket?