You use the big words, but you don't really know what they mean, huh?

Whether you can extrapolate (in a loose sense) from past market data to future outcomes runs down to the question whether a market is a Markov process (or rather: can be modeled by one) or not. Some processes can be shown to be likely to satisfy that property (in which case, yes, you can't extrapolate), some processes don't, then you can go hunting for predictive factors (which take historic data as input.)

Hint: even most of mainstream economy doesn't believe markets in general satisfy the Markov property. They just think (most) markets are also efficient enough to price in the information potential almost immediately. By that interpretation (which I don't share), TA still doesn't work, but not for the reason you seem to think it doesn't.

Depends on your definition of 'usefulness'. Getting around strict capital controls (e.g. China), politically motivated restrictions of payment processing (e.g. donations to Wikileaks), or legal restrictions (e.g. dark net marketplaces) are clear cases where decentralization is useful, I have little doubt about that.

Whether there will be a wider appeal than the cases above (e.g. contracts in general that are not subject to enforcement/regulation by a central authority, or the often invoked 'store of value' usage case) is something we're in the process of finding out. I don't think it's a given those broader usage cases will be based on the Bitcoin network, and not some other (possibly centralized) crypto, but I'm also pretty skeptical towards the opposite claim, that it's a given it won't happen. Hence, speculative activity all around.

Not going to take personal offense at your question like some others do but:




... is the answer already to your own question. Of all the proposals anyone ever came up with (to my knowledge), you can satisfy two of the following three conditions, but not all three of them at the same time: secure, decentralized, for free^*.

There's maybe a discussion to be had if PoW is the final correct choice for the main player in crypto (Note: I still think it is, roughly, because of hardware cost binding miners to the blockchain, and only one blockchain at a time), but that's more specific already than the objection to your idea:

Describe please how a decentralized ledger without a native token incentivizes participation?

Sure, participation (of miners) could be funded by outside capital, but then the question becomes, how to distribute it? How to see which outside actor has which share of the funding? Such a system sounds a lot like political party funding in the US, and I would describe that as 'partisan' and 'toxic' long before I would use the term 'decentralized'.

In the end, any proposal I've heard or can come up with myself either violates the decentralization constraint, or it becomes so complex that it essentially recreates the native token system of the blockchain. But that one exists already





^* I know, the point can be made (and would be correct) that e.g. a centralized system like Visa is anything but cheap. The point is, in principle, if security rests on one entity with absolute power, this removes the broader system of financial incentives you need for a decentralized setup like crypto.

Still mostly long, still undecided where we're heading in the near to mid future. In the simplest terms, there's a strong case for the bears in that the move from Jan looks very much not impulsive (volume wise, and probably also by EW - which I don't really practice though), and there's a strong case for the bulls in that the early Jan capitulation looked very convincing (volume wise again), that we broke a number of long standing resistances (MAs and TLs), and finally that so far, the market seems to shake off any attempt to induce panic selling. If that sounds rather unhelpful, you're entirely right, but that's all I got :/

If there's just one good thing about the current market condition (slightly boring, slightly leaning upwards) it's that it's possible to have a civilized conversation in here

I know there's a kind of "law" in (amateur, perhaps also professional) algorithmic trading that your strategy should be time invariant. Some even go as far as saying it should be market invariant. In reality, I think it's more a heuristic to find out if the "pattern" you think you detected is just noise, or if you're onto something.

This is completely 'finger in the air', but I sometimes think that certain patterns that seem to be a good predictor emerge across different time scales (hence, motivation for the above "law"), but they're not equally important/active across all scales.

EDIT: The previous paragraph would still be compatible with "TA is based on the study of past market data, primarily price and volume. This seems to implicate that if the same pattern emerges in the charts in April or June, the conclusions should be the same" I would argue: you could simply be missing one variable, say, something like "total volume necessary until pattern x becomes active/has a strong enough influence on the market".




That was the point I was trying to make. I believe "chartism"/TA is more than just a self-fulfilling prophecy, but there is some self-fulfilling aspect to it, mainly in the form of the exact points of resistance/support.

What I mean is: Some combination of signals tells traders "market is bearish, even though we're currently going up" (the non circular part of TA). Next question, where exactly to go short? "Hm, let's say DSMA50. Seems like a good place as any." After the first few sell at exactly that point, it becomes a "point of heavy resistance" (the circular part of TA).

/my 2 crackpot cents

I get the feeling there's either an insult wrapped up in there, or a compliment.

Or possibly both. 

ಠ_ಠ

What he said. Same emptiness of it all, but now with 200% more caviar.<sup>*







*</sup> I don't really believe in the common "moon" scenarios. I think there's a solid chance price will crack $1000 again, but I'm not convinced it'll ever get near $10,000, let alone $100,000.

Obviously not. Though a non-shifted MA doesn't mean you treat a descent like an ascent, no? Here's the counter question: Can you exclude (in general) that a signal that lags by n day is useless to base a market decision on? Maybe. Next question: What if a certain number of market participants make a decision based on the (mis)application of the lagging indicator? Still guaranteed that there is no exploitable pattern in there?

Not necessarily disagreeing with you here (about bullish vs. bearish outcome). Plus, I like to read your comments and what you have to say about the market.

But I do think inca was right, that you've been bearish for a pretty long time, while the sentence "... as time goes by I am more ..." sounded like you had a more recent change of heart. Not  intended to be a personal attack, just some observation and a bit of poking fun

That's an objection to the use of averages in TA I've heard several times, and it's valid in principle, but:

a) It assumes you are looking at it from a signal processing perspective, where using averages like this way would simply be wrong. Instead, chartists know (intuitively at least, I believe) what is going on, and accept that the m day average from days n-m to n plotted to day n is a lagging indicator, and then try to work around this inherent lag.

b) There are other moving averages than the simple ma that are tweaked to address the lag problem, Hull's ma comes to mind. Of course, doing so comes at a cost (other constraints are smoothness, and a "bias" - probably not the correct technical term - towards a subset of the values on which your signal is based. The latter is imo the main "offense" of the Hull, for example).

Phrased that way, it sounds more convincing

No idea if they're up for interviews (or even like being mentioned in this context ), but from the top of my head, masterluc, RyNinDaCleM, windjc are all traders who seem to have had a strong grasp of the market, for a long time, together with what appears solid risk control.*

* There's more than those three, I'm sure, but they're the ones that came to my mind right now.

The tests Gavin ran wrt block size were for 20MB and 200MB. His results are that the *current* code (but with increased max block size and tested for block at max capacity) can be run on *current* (consumer, non specialized) hardware even at those sizes.

There's this meme that the network currently can handle around 7 transactions per second (tps). In reality, because of higher average tx size, it's below that (somewhere between 3 and 6 tps, from what I know).

All other things equal, a block size of 20MB would means something around 20 tps. 200MB, around 200 tps. Not bad, but still an order of magnitude short
of Visa's (reported) 2000 tps on average.

However, keep in mind: this is for unoptimized code. Gavin mentioned what he considers a number of "low hanging fruit" optimizations to the MIT crowd, among them blockchain pruning and vastly smaller block announcements.

So, to summarize:

(1) I'd say a reasonable target for stating positively that "Bitcoin is scaling up well" would be 2000 transactions per second (tps), the VISA number

(2) Current code, current hardware, bigger blocks gets us to ~200 tps, so about 10% of the goal

(3) There's a number of optimizations that seem to be widely considered technically possible (eg pruning), and the main limitation  in implementing them seems to be a) time constraints, b) high security/testing requirements for live changes to the code, c) consensus issues, especially if changes require a (controlled) hardfork

(4) All of the above doesn't even factor in the assumed increase in available bandwidth to the consumer, and cheaper storage capacity. Even if Moore's Law (assuming exponential growth) won't hold forever, hardware and bandwidth will  certainly continue to be improved, and become cheaper to employ.


So, point (2) means, if there'd be consensus for a controlled fork to change max block size to Gavin's proposal (20MB max now, then +40% per year), we could already scale up to about 10% of average VISA. The remaining factor 10 seems well within reach when consider points (3) and (4).

Beyond that (i.e. "the network handling *all* of humankinds transactions."), I have no idea if that's feasible, and I don't know if anyone calculated that though. What I had in mind with my original response in here was "Bitcoin scales to the size of the world's largest CC company", not "Bitcoin becomes the only money". I'd say, the former scenario wouldn't be half bad already.


Disclaimer: I'm providing a digest of what I understood from Gavin (and other devs') comments on this topic. There are probably more qualified people to answer this, user DeathAndTaxes comes time mind. If there's any glaring technical mistake in my above post, please correct me on it.

Short answer: not true / false dichotomy

Longer answer: Scalability is solvable for the foreseeable future, and it is being solved. Here's a recent talk by Gavin on the topic, or you could go directly to his blog and look at his results for testing scaled up versions of the code, for example, how a blockchain with much larger blocks would handle on consumer hardware.

@dnaleor

I know, it's your thread, but if you make a bold claim, I hope you don't mind a reaction

Not sure if I'd say it's a bull market yet. Probably too early to say that. But I do take the following as a pretty positive sign:

Weekly MACD and VWMACD are heading up again (green histogram). Still deep in the negative, but going up. Last time that happened was June/July (MACD) and November (VWMACD), but then, only at a time when the price trend already had lost all its steam. If price creeps up from here, or even consolidates in the current region, I'd take that as a solid indication that the trend is heading for ~400 (upper weekly BB) in the mid term.

Eventually, volume will have to pick up however. By my reading, volume looks better already than in June/July and November (the two failed breakouts), and like I said in another thread, I think the 2nd week of January volume looks quite convincing to me as a capitulation event, but eventually, volume on the green weeks has to confirm the price trend.

Woah. What happened here? First time we agree on something

Not sure if I would equate WSJ and Wall Street. I think the journal (roughly) represents interests of a group ranging from the higher end of the upper middle class, to households in the top 10% of annual income. So, merely "the affluent", not so much "the filthy rich". In a way, I think that's even better

Great post, Ryn.

For the record, I don't completely follow your analysis, for one reason only really - the week of Jan 12 volume candle is so strong that I don't care *how* we got to that volume (margin cascade, market despair), I only care that at the end of the week, 1.5 million coins had changed hands on the big three USD exchanges alone. That reeks of capitulation to me.

That said, I tend to take your analysis serious, and your post is probably the most coherent argument in favor of the 'mid term bear case' I've read so far.

As far as I know, the story is originally by WSJ. At least CNBC is referencing it that way, "the Wall Street Journal reported...". Which makes it even more pathetic in my opinion: taking over a story from somebody else, then put your own spin to it to make it fit your newspaper's narrative on the topic.

I know, I know, that's how mass media works. Still, kind of amusing when it happens in such an obvious way.