Bitcoin Forum

Economy => Economics => Topic started by: hazenyc on November 22, 2013, 08:40:37 PM



Title: Hash influences price or the other way around? Statistical result:
Post by: hazenyc on November 22, 2013, 08:40:37 PM
Looking at all available price & network hashrate data going back to August 2010, once and for all we can put to rest (statistically speaking) of the chicken and egg of what causal relationship there is between $price of BTC and network computational power. Using a Granger causality test (in EViews) we find:
(http://en.wikipedia.org/wiki/Granger_causality (http://en.wikipedia.org/wiki/Granger_causality))

Pairwise Granger Causality Tests            
Sample: 8/16/2010 11/22/2013         
Lags: 4         
         
 Null Hypothesis:                                                     Obs.   F-Statistic   Prob.
         
H0A) LOG(HASH) does not Granger Cause LOG(PRICE)    1182    0.30372   0.8756
H0 B) LOG(PRICE) does not Granger Cause LOG(HASH)              8.96203   4.E-07
         
What this says is that A) we Fail to reject the Null hypothesis that a change in hash does Not cause a change in price, because the F-statistic is very small. This means that the statement "hash does not change price" is likely very true to a high degree of certainty.
On the other hand in B) we see that the F-statistic is very high (significant) for the Null hypothesis that a change in price does Not change the hashrate. This means we should reject this null hypothesis with a high degree of certainty, and accept the alternate hypothesis: "A change in prices DOES cause a change in hash".

(I used natural log of each variable to normalize them a bit as they both have increased very rapidly lately. If you don't use the log, the results are even MORE significant).

This sort of throws a wrench in the labor theory of value in mining bitcoins, but I think the debate isn't 100% over yet on that front.

cheers.


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: Impaler on November 23, 2013, 12:35:56 AM
What you really want to look at is the PROFIT of mining.  High profitability mining most certainly causes a price increase and it evidently so because the two largest most sustained run-ups in BTC price have both come about immediately following the introduction of newer generation of mining technology (GPU, ASIC).

The mechanism of price increase is as follows.  Miners new hardware turns a huge profit compared to old equipment that could only just cover electrical costs, miners do not need to sell many or sometimes any coins to cover newly reduced costs.  Profitability generates media hype, hype brings in buyers and starts price increase.  Miners hoard most coin production and cause a shortage in the market, price bubble goes exponential as coin liquidity dries up.


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: goxed on November 23, 2013, 12:51:18 AM
Looking at all available price & network hashrate data going back to August 2010, once and for all we can put to rest (statistically speaking) of the chicken and egg of what causal relationship there is between $price of BTC and network computational power. Using a Granger causality test (in EViews) we find:
(http://en.wikipedia.org/wiki/Granger_causality (http://en.wikipedia.org/wiki/Granger_causality))

Pairwise Granger Causality Tests            
Sample: 8/16/2010 11/22/2013         
Lags: 4         
         
 Null Hypothesis:                                                     Obs.   F-Statistic   Prob.
         
H0A) LOG(HASH) does not Granger Cause LOG(PRICE)    1182    0.30372   0.8756
H0 B) LOG(PRICE) does not Granger Cause LOG(HASH)              8.96203   4.E-07
         
What this says is that A) we Fail to reject the Null hypothesis that a change in hash does Not cause a change in price, because the F-statistic is very small. This means that the statement "hash does not change price" is likely very true to a high degree of certainty.
On the other hand in B) we see that the F-statistic is very high (significant) for the Null hypothesis that a change in price does Not change the hashrate. This means we should reject this null hypothesis with a high degree of certainty, and accept the alternate hypothesis: "A change in prices DOES cause a change in hash".

(I used natural log of each variable to normalize them a bit as they both have increased very rapidly lately. If you don't use the log, the results are even MORE significant).

This sort of throws a wrench in the labor theory of value in mining bitcoins, but I think the debate isn't 100% over yet on that front.

cheers.

Nice, you a Physicist?


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: hazenyc on November 23, 2013, 02:46:57 AM

Quote

Nice, you a Physicist?

No, economist.


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: AnonyMint on November 23, 2013, 03:39:38 AM
What you really want to look at is the PROFIT of mining.  High profitability mining most certainly causes a price increase and it evidently so because the two largest most sustained run-ups in BTC price have both come about immediately following the introduction of newer generation of mining technology (GPU, ASIC).

The mechanism of price increase is as follows.  Miners new hardware turns a huge profit compared to old equipment that could only just cover electrical costs, miners do not need to sell many or sometimes any coins to cover newly reduced costs.  Profitability generates media hype, hype brings in buyers and starts price increase.  Miners hoard most coin production and cause a shortage in the market, price bubble goes exponential as coin liquidity dries up.

Thank you for that insight!


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: User705 on November 23, 2013, 03:45:38 AM
What you really want to look at is the PROFIT of mining.  High profitability mining most certainly causes a price increase and it evidently so because the two largest most sustained run-ups in BTC price have both come about immediately following the introduction of newer generation of mining technology (GPU, ASIC).

The mechanism of price increase is as follows.  Miners new hardware turns a huge profit compared to old equipment that could only just cover electrical costs, miners do not need to sell many or sometimes any coins to cover newly reduced costs.  Profitability generates media hype, hype brings in buyers and starts price increase.  Miners hoard most coin production and cause a shortage in the market, price bubble goes exponential as coin liquidity dries up.
Of course it could be that new tech brings new users because they think it is profitable.  They end up thereafter realizing it isn't that profitable because they all do it at once and difficulty skyrockets and then they have to hold coins or it's a loss which causes a price rise and then the realization hits that it's more profitable to buy and hold.  It seemed that way to me with the ASICs but I got here at the end of the GPU era so I could be wrong.


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: deisik on November 23, 2013, 10:07:14 AM
The mechanism of price increase is as follows.  Miners new hardware turns a huge profit compared to old equipment that could only just cover electrical costs, miners do not need to sell many or sometimes any coins to cover newly reduced costs.  Profitability generates media hype, hype brings in buyers and starts price increase.  Miners hoard most coin production and cause a shortage in the market, price bubble goes exponential as coin liquidity dries up.

Why would this media hype and all that about the profitability (read coin output) of mining bring in new buyers of BTC? In the first place it would cause price drop expectations (more coins would be expected to be mined). It could bring in new BTC miners with ensuing BTC price decrease (not increase), because part of them would certainly sell some of the newly mined coins in the market... 8)


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: deisik on November 23, 2013, 10:13:46 AM
Of course it could be that new tech brings new users because they think it is profitable.  They end up thereafter realizing it isn't that profitable because they all do it at once and difficulty skyrockets and then they have to hold coins or it's a loss which causes a price rise and then the realization hits that it's more profitable to buy and hold.  It seemed that way to me with the ASICs but I got here at the end of the GPU era so I could be wrong.

This also seems a bit dubious to me. New miners might indeed end up realizing that mining isn't profitable anymore and decide to hold their coins because of a price rise, but you first have to explain the reasons for this price increase, which makes it more profitable to buy and hold... 8)


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: deisik on November 23, 2013, 10:20:01 AM
What you really want to look at is the PROFIT of mining.  High profitability mining most certainly causes a price increase and it evidently so because the two largest most sustained run-ups in BTC price have both come about immediately following the introduction of newer generation of mining technology (GPU, ASIC).

Could that be just some form of correlation (if ever) without causation? To substantiate my position, I suggest looking at the current spike of prices whereas mining technology is presently at a deadlock...  ::)


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: PenAndPaper on November 23, 2013, 10:33:45 AM
Can you post the value of R^2?


Title: Re: Hash influences price or the other way around? Statistical result:
Post by: deisik on November 23, 2013, 11:04:32 AM
Can you post the value of R^2?

What should in your opinion be taken as an independent variable (average/total/maximum hashrate)?  8)