Bitcoin Forum

For the first time in Bitcoin history, the six-month trailing average price will go over 10 US$ in a few days. Currently, we've already broken the record set over a year ago:

http://bitcoincharts.com/charts/chart.png?width=940&m=mtgoxUSD&SubmitButton=Draw&r=&i=&c=1&s=2011-01-01&e=2012-11-29&Prev=&Next=&t=S&b=&a1=SMA&m1=183&a2=&m2=25&x=0&i1=&i2=&i3=&i4=&v=0&cv=0&ps=0&l=1&p=0&

Consistently high prices are healthy, and hopefully this trend will continue.

Why are high prices healthy?

Would not an increase in the amount of transactions be healthier and they do not seem to be that thrilling over a 1 year time period compared to the rise in price especially when you remove satoshi dice from the equation. Hint, it started in May 2012.

I would like to state the price of btc has little to do with its health when considering other factors which are more important.
Matter of fact the high price might very well be a negative factor. It is hard to say for sure.

Bitcoins are a purely sterile asset and a high price represents that value already produced by the economy has been transferred from holders of some other asset to holders of bitcoins. Bitcoins have even outperformed gold.

http://www.runtogold.com/images/gold-bitcoin.jpg

This bodes wells for the general health of the Bitcoin economy and is representative of the value consumers derive from the utility of bitcoins. Since supply is known in advance the change in price is due to changes in demand for bitcoins. Thus, a rising price is the result of rising demand for bitcoins.

This demand comes from (1) speculation and (2) transactional. Speculative demand would mean that holders of bitcoins are becoming more confident in it as a store of value and are placing increasingly larger amounts of capital in it. Transactional demand, where the price elasticity of demand is positive (http://en.wikipedia.org/wiki/Price_elasticity_of_demand), has little if any change due to changes in the price of bitcoins and if there is greater demand then it is because of greater use of bitcoin as a medium of exchange.

Thus, a rising price of bitcoins in national fiat currencies or commodity monies represents a wealth transfer to holders of bitcoins that results from increased demand and the price signal bodes well for Bitcoin.

My favorite indicators for the health of the Bitcoin economy is:


Number of transactions excluding popular addresses 12 weeks average. It's a little down from the top, but much higher than 6 months or a year ago.

http://blockchain.info/charts/n-transactions-excluding-popular?timespan=all&showDataPoints=false&daysAverageString=84&show_header=true&scale=0&address=


Total transaction fees 12 weeks average. It's never been higher.

https://blockchain.info/charts/transaction-fees?showDataPoints=false&timespan=all&show_header=true&daysAverageString=84&scale=0&address=


Market capitalization 12 weeks average. It's never been higher.

http://blockchain.info/charts/market-cap?showDataPoints=false&timespan=all&show_header=true&daysAverageString=84&scale=0&address=

Excellent.  My short-term prediction of down may just be nullified.

The USD transaction fees chart is fairly new?

Kupsi, you are definitely onto something very significant here. 12 weeks is a little too short term to see the true nature of the secular trend. To get a better picture of the secular trend, and hence where Bitcoin is going to be in 2-7 years, take a look at these charts using the 200 day average.

200 day moving average for market capitalization (http://blockchain.info/charts/market-cap?showDataPoints=false&timespan=all&show_header=true&daysAverageString=200&scale=0&address=)

200 day moving average for USD transaction fees (http://blockchain.info/charts/transaction-fees-usd?showDataPoints=false&timespan=all&show_header=true&daysAverageString=200&scale=0&address=)

I have not crunched the raw data yet but I bet the r-squared correlation coefficient has to be in the high 90's. This is awesome data presented so simply graphically. I do not think there is a better leading indicator around.

The reason is because all other metrics can be faked. But transactions fees represent actual economic losses to the participants. Why take the economic losses but for having Bitcoin provide greater value than the cost of the loss?

I love your charts  :D

Hope we are as optimistic next year as we were last year :)

Man you dug deep to find this one :D

 Less than one year ago is hardly digging deep.

Ok, "time-wise" it isn't so deep. Bitcoin-time though...that's another story