you still have to set strict stop-losses and always follow them.
Are you willing to quantify this stop-loss approach, so that I could run a few simulations? Eg. "always sell when price dips 10% from the ATH", "Buy back at ATH" |
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The significance of all this is that if we trade in a range for a few weeks it is megabullish. And right now it looks like we are going to (at worst) trade at a high range 850-1050 than a lower range 650-850.
Simply amazing. I expected more out of the bears honestly.
The bears are the ones who sold their coins and are waiting for it to go down. The bulls are ones who have the coins and are hoping it to go up. The funny thing is that neither bulls nor bears are in the position to influence the market to their desired direction (because they already made their own move). The success of either is dependent on how to make the other one fold. The forum (incorrectly) constantly talks about bulls buying and bears selling, which is not the case. An upward action is bear running to cover (unless it's virgin buying) and downward action is bulls panicking. It is generally better to be bull, because the new money raises price on average 24% per month, which is really a lot. When price has risen to much higher than the trend, however, it may be advantageous to be a bear. From now I will have 3 months to buy back at trendline at a wash, or up to 100% gain. Any number of negative things can happen meanwhile, short-term reducing the price, and my buyback method catches flashcrashes also. The only thing I don't like with being a bear is that posting in the forum is not fun anymore. If I am right, everyone who lost their shirt is bitter at me (I am very good in explaining how right I was  ). If I am wrong, people whose general trackrecord is much weaker, are laughing at me. I have not made my 51% APR by listening to other people of course, but I also don't want to argue with them. So I am contemplating to reduce/leave the forum for a few months. I have also other projects. Thoughts? |
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And if you don't know that the 2011 bubble went below its previous starting point
The 2011 bubble's starting point was $0.06. The bottom after the crash was $1.99  What is especially interesting is that if you draw a least-squares fit trendline in the logarithmic price chart here, you get the same (+/- 10%) slope as with the whole of Bitcoin's price appreciation over the 5 years of its existence. Also if you take only 2013 as your data, again, same thing. Now be my guest and rush to buy bitcoins and not understand that this information is only available because I spent days modelling it. Out of curiosity when you superimposed this rally on top of those two things what does it tell you the new bottom is, when it will be met and at rate the rally will begin? I have not done anything resembling that kind of analysis for weeks, so sorry - no new information. Last time when I was predicting bubbles based on previous bubbles, the intraday post-bubble bottom should be about 1.7-1.9x the intraday pre-bubble ATH. So considering that the pre-bubble ATH was 266, now we are looking to have a bottom in the 452-504 range. And that is intraday, so according to this we should buy quite aggressively starting from 550, because it takes time to buy 1000s of coins. My two calls for the high point of the bubble ($2000+ and 10kCNY+) were off. |
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And if you don't know that the 2011 bubble went below its previous starting point
The 2011 bubble's starting point was $0.06. The bottom after the crash was $1.99 What is especially interesting is that if you draw a least-squares fit trendline in the logarithmic price chart here, you get the same (+/- 10%) slope as with the whole of Bitcoin's price appreciation over the 5 years of its existence. Also if you take only 2013 as your data, again, same thing. Now be my guest and rush to buy bitcoins and not understand that this information is only available because I spent days modelling it. |
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Lol. No one wants to short BTC on Bitfinex now   Contrarian indicator. Let's see if I wanted |
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I am not comfortable with assuming the log10 trendline is the norm. It appears to me to be a basing pause between the initial mania for the techies and the mass market mania to come.
I tried to fit in many kinds of trendlines but all ended up surprisingly close to the one whose growth coefficient k ~ 23%/month. The original mania phase in 2010-2011 if we measure from start to the bottom of the crash, has the same slope. If we only pick the upward going part, then we have a nice model whose prediction is todamoon, but those who followed it, lost money I believe you are intelligent enough to actually understand this matter. Even the big bitcoin bubble which will commence in 12-24 months perhaps, will nicely obey the model. If you compare the fractional gains that could be made by moving back to trendline (e.g. perhaps at most a double) with the losses to be sustained if the mass mania overpowers (e.g. it could quickly be up another 10X in a few more months), then I think one needs to have stop-losses on their short positions.
I think this is not necessary. Let's see the gamble that I am doing now (selling half and waiting for buyback). It consists of 2 scenarios one of which will happen: - I will get to buy back double the sold amount, which will increase my stash by 50%, and then bitcoin likely goes to the moon- I will never get to buy back, so I have the millions, the trendline buyback price rises, and my stash is permanently 50% smaller BUT this can only happen in connection with the event that Bitcoin goes to the moon. The first scenario is obviously the optimal. Very good increase in bitcoin holdings after only 1-3 months waiting, and meanwhile some shielding against the total failure of Bitcoin. The second one is also not a loss. I have a lot of money, and the only thing that causes me not to reinvest the money eventually, is the relentless rise in BTC price. The trendline hits $1 million per BTC in 2016, so either I win or I win. (I actually did suggest using stop-loss in my diary thread, where I also copied this to.) |
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I'm 40.
Ah OK, let's leave it there. I remember your entrance to the forum and was thinking oh sheez what a kid....  I appreciate your way of making money for you, and will tell when I have closed my trade, and how much I made. Peace?  |
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However, you are mortal and catastrophically overconfident in your ability to predict chaotic systems.
That is just plain misunderstanding. I know that probabilities add to 1 and I should not invest more than I can afford to lose It is exactly the ordinary people who gamble with all their wealth daily (by taking a mortgage, for example). They are taking a serious financial risk. I am never taking any financial risk. By being risk-free I have been able to pursue the opportunities and grow our family wealth at about 51% APR over 11 years. |
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And you're going to be eating crow AGAIN when your prediction (based on the past performance of bitcoin bubbles) comes up false.
How come I am so much richer than you if all I do is to handle money, and I do it so badly?  How old are you, 22? EDIT: In addition you say that 2011 left you in disbelief and 2013 in euphoria. Ummmm...notice that those 2 bubbles ended completely different. And yes, I am a bubble behind you, but I am aware enough to know that this bubble and the last will end completely different too.
What were the differences in the bubbles' endings? |
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It took years to recover from 2011. It took months to recover from April 2013. This rally will be even easier to recover from. Barring some bad news, it won't take several months before we start going up again. We might, MIGHT, dip below $600 but I really doubt it. I thought for sure we would go back to $50. So much so that I ignored the obvious fact that the bottom was in at $66. People are staring at $600 now. Everyone knows the significance of that #. Barring bad news, I don't think we go below it. If we do then $500 will be the absolute bottom. But we will be headed north again, most bearish scenario, by February.
Agreed. The cycle is accelerating, all the signs are there. We're hitting the mainstream. Train is picking up steam, if you like. Risto and the bears are myopically pointing to the meaningless trendline... look at the time lag between the April and November rallies compared to the behavior before, and tell me this thing isn't accelerating. I'd be unsurprised to see the next rally inside of 3 months. I have also had my first bubble, which is characterized by disbelief, and the second (first in which I was invested) characterized by euphoria and denial of bubblepop. Now in my third bubble I am wiser and know the trendline, and the value of pi() is still 3.14159... even in heaven, and some things just don't change, and even if they do, you can quantify then mathematically. This is analysis over emotion thing now. Some point in the next 3 months we will see 0.5, possibly lower, and afterwards I will tell you how much I made. You(pl.) sound so much like me last April that I wonder if your investor cycle is one bubble behind me |
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Bears roam freely. And the choochoo train runs them all over.  Buffaloes were bulls afaik.... Bears roam freely. Bulls, sheep, pigs are domestic animals => get slaughtered.
bears get left out in the cold and the only way they can survive is if they sleep for 5 months in a row now whales on the other hand roam free all the time and do whatever the fuck they want  If I could post a pic of my castle, I would... there will be cars also, rest assured. Whale-bear castle in Estonia. |
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But what do you understand? Nothing. In this and this mainstream media article about my Bitcoin research, both the article and the comment section suppose that the methodology is based on blockhain address balances, which is just plain incorrect. |
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You thought I thought that I would make friends here by pushing hard to both eyes at the same time. No, I did not think I would Bears roam freely. Bulls, sheep, pigs are domestic animals => get slaughtered. |
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Incorrect. Phew. Understatement of the century. If you have read any of my threads, you know very well that I know a lot about many things, and actively use this knowledge to my advantage. What comes to the predictive value, both of the previous big bubbles behaved nicely according to this model, with predictive value. We need to have jumped to something completely different, in order for this model not to continue holding true. The probability of this happening is well under 50%, even with Bitcoin Bitcoin price and adoption are different, and I have an article about this in store. My bet stands, by the way, in case you really believe all this and aren't just trying to reverse the mistake you made by selling out at $700. Breaking out of that triangle in a big way. Anyone want to place bets on recovery or bull trap?
You mean an actual bet? Yeah, sure. I feel we will go visit the exponential trendline. I am game. 10 BTC that we don't touch your exponential trendline in December? The one that projects $428, not one that incorporates data up to Dec. 9. Ah, never saw that one. From the high point of the dead cat bounce, to the day that exponential trend is breached, last time it was 45 days. If we were to bet on similar terms, the bet would stand as follows: - On or before 25. January 2014, the price is less than 573. There is no much reason to bet 1:1 whether price goes to 428 in December. I am getting better odds by just selling at >2*428 |
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My firm analysis is that bitcoin is overvalued: I constructed a trendline based on daily prices, and calculated through the last and current bubbles.
It is helpful to know what a logarithmic scale means. Basically it means that every 0.1 difference equals to 26% (compounding). Ten times 0.1 compounds to 1.26^10 = 10.
We express the relative undervaluation/overvaluation in logscale, where 1.0 means that the actual value is 10.0x trend and -1.0 means that it is at 0.1x the trend. That extreme valuations we did not see, though.
Spring
At the low point in 14.1., we started the rise from -0.46.
The trendline was crossed in 21.3., at 0.00 (66 days later)
The peak was reached in 9.4., at 0.45 (19 days later)
The low was reached in 7.7., at -0.30 (89 days later)
Autumn
At the low point in 3.10., we started the rise from -0.34.
The trendline was crossed in 9.11., at 0.00 (37 days later)
The peak was reached in 30.11., at 0.46 (21 days later)
The low was reached in TBD
After spending the whole week so far pretty much with these calculations, I can say that I mostly subscribe to the scenario where bitcoin's exchange rate is currently overvalued by more than 100% (0.32 in log scale). Because the overvaluation is so gross and the delusion of fair value so pervasive (I even personally "turned bull" at the ATH after making my initial bearish call in 20.11. at a lower price), it will take 1-3 months to reach the healthy low in relative valuation. It is not guaranteed that the relative low coincides with the absolute low (the cheapest intraday opportunity to buy in April was only 2 days after the bubble pop, whereas the final capitulation happened at a little bit higher level).
Because I am now so sure of this, I will seek the opportunities to trade the downtrend, sell up to 50% of my bitcoins with the intention to buy them back at the trendline, and to instruct the ones in their bitcoin accumulation phase to buy only very limited amounts when there is still air in the price.
Bitcoin is going to the moon, but it is not going to the moon overnight. I watched it go as close as possible to the moon from 0.25 to 32 and then to 2, which was my entry point. Realistically the following 6 months will not see similar development (going from 1000 to 128,000 per bitcoin, without stopping). If they do, then the other half of my bitcoins is worth so much that it gives me enough to think about.
The trendline (which I constructed anew from daily data) is now at 420, indicating that there is not much point to buy anything over 500 from the flashcrashes that will certainly continue during the following days and weeks.
If we allow 60 days of downtrend from the bubblepop (30.11.) to the final capitulation (est. 29.1.), the trendline is approximately at 590. The characteristic of a low is about -0.20...-0.30 relative valuation. To be on the safe side, we take -0.20, which corresponds to the target price of 372. To add some safety margin, the highest bids should be at 450 or so.
So now it's the time to be right and sit tight (this time with the fiat of your choice). Objectively bitcoin is now expensive, and speculative selling at prices above 800 is a very good proposition. If you have been thinking where I've been the last few days, the answer is: selling. And running excel calculations. and selling some more.
I believe that bitcoin can reach 1 million dollars in 2016, but not now. Selling now a large percentage of bitcoins with the intention to double the stash by buying at half the price 1-3 months from now has more than 50% probability of success, therefore is a +EV move. It would have been possible both in 2011 aftermath and at the top of the spring 2013 dcb. The only time it would not have been possible was after the 2010 "bubbles" that never popped and just went on. I think I have way better than 50% chances here - especially as the "negative" scenario is that I will be one of the richest people in the world |
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I constructed a trendline based on daily prices, and calculated through the last and current bubbles.
It is helpful to know what a logarithmic scale means. Basically it means that every 0.1 difference equals to 26% (compounding). Ten times 0.1 compounds to 1.26^10 = 10.
We express the relative undervaluation/overvaluation in logscale, where 1.0 means that the actual value is 10.0x trend and -1.0 means that it is at 0.1x the trend. That extreme valuations we did not see, though.
Spring
At the low point in 14.1., we started the rise from -0.46.
The trendline was crossed in 21.3., at 0.00 (66 days later)
The peak was reached in 9.4., at 0.45 (19 days later)
The low was reached in 7.7., at -0.30 (89 days later)
Autumn
At the low point in 3.10., we started the rise from -0.34.
The trendline was crossed in 9.11., at 0.00 (37 days later)
The peak was reached in 30.11., at 0.46 (21 days later)
The low was reached in TBD
After spending the whole week so far pretty much with these calculations, I can say that I mostly subscribe to the scenario where bitcoin's exchange rate is currently overvalued by more than 100% (0.32 in log scale). Because the overvaluation is so gross and the delusion of fair value so pervasive (I even personally "turned bull" at the ATH after making my initial bearish call in 20.11. at a lower price), it will take 1-3 months to reach the healthy low in relative valuation. It is not guaranteed that the relative low coincides with the absolute low (the cheapest intraday opportunity to buy in April was only 2 days after the bubble pop, whereas the final capitulation happened at a little bit higher level).
Because I am now so sure of this, I will seek the opportunities to trade the downtrend, sell up to 50% of my bitcoins with the intention to buy them back at the trendline, and to instruct the ones in their bitcoin accumulation phase to buy only very limited amounts when there is still air in the price.
Bitcoin is going to the moon, but it is not going to the moon overnight. I watched it go as close as possible to the moon from 0.25 to 32 and then to 2, which was my entry point. Realistically the following 6 months will not see similar development (going from 1000 to 128,000 per bitcoin, without stopping). If they do, then the other half of my bitcoins is worth so much that it gives me enough to think about.
The trendline (which I constructed anew from daily data) is now at 420, indicating that there is not much point to buy anything over 500 from the flashcrashes that will certainly continue during the following days and weeks.
If we allow 60 days of downtrend from the bubblepop (30.11.) to the final capitulation (est. 29.1.), the trendline is approximately at 590. The characteristic of a low is about -0.20...-0.30 relative valuation. To be on the safe side, we take -0.20, which corresponds to the target price of 372. To add some safety margin, the highest bids should be at 450 or so.
So now it's the time to be right and sit tight (this time with the fiat of your choice). Objectively bitcoin is now expensive, and speculative selling at prices above 800 is a very good proposition. If you have been thinking where I've been the last few days, the answer is: selling. And running excel calculations. and selling some more.
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For you or your girlfriend? I guess she gets to ride in it regardless though! So happy for you!! Honestly my wife bought it with her bitcoin. It is in her name. I bought an XL 500 (not paid for with btc sadly) about 4 hours before. Was a long day. And yes, once the Lambo gets here there will be all sorts of pics and what not. Hope to get the media on this and boost BTC. Once people know BTC can be used to buy things like Lambo's they might get a bit more interested in it. That's the way to do it, man! |
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Anyone interested in running a similar breakdown for litecoin? It's probably even more lopsided.
I'm all interested in seeing the distribution for LTC and scamcoins. Because my new article (under construction) will attempt to prove why Bitcoin has something that they don't, and it is related to the dynamics of having owners in different categories. A total refutation of the spirit behind the BI article "it is bad, that there are large and small holders", whereas it is not only good, but absolutely crucial! |
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OP updated to the best chart (by tonico).
I did some very interesting analysis re:the similarities of relative overvaluation in April and now. In April we were "only" about 3.2x the then current trendline when the bubble popped.
Now the high value has been similarly 3.3x (at ATH).
If the bubbles compare, expect $400s to be visited not only briefly but repeatedly.
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Risto, do you advice me to follow your SSS plan- buy despite we are over the long trend? I got interested again in bitcoins when the price was around 220 at bitstamp (news about first Bitcoin ATM published in Estonia). After that i made Bitstamp and tried to get verified. Took me 4 times and finaly the price was around 770. Made my first buy at 82x and now my average is 930. At the moment i have 50 per cent of fiat waiting in bitstamp of what i have already invested in bitcoins. I am not sure if and how much i am able to invest in the future. I just do not want to loose potential ROI as i have done so far.
This kind of decisions are best that everybody makes for himself. As for me, I am now double short because the dcb will probably bounce at 926 (BS), 988 (Gox) and it is looking toppish. Also it is over trendline. According to SSS, you should not care though |
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