I revised my bitcoin logistic adoption price analysis charts to combine four possible scenarios on one chart ..  red - assume a $5,000,000 maximum bitcoin price when fully adopted by financial speculators orange - $1,000,000 green - $100,000 blue - $40,000 I also re-fit each case to more accurately pass through the final price history data point. It is clear now that the exponential portion of the logistic curve, i.e. the straight line on the log chart, does not predict the maximum price. Here are the corresponding price targets summarized ...  The key result of this analysis is that we should not expect the current exponential growth of bitcoin prices to last more than 36-48 months - even under the most bullish imaginable scenario. Buy sooner rather than later is my obvious conclusion. The shared spreadsheet containing commentary, calculations and charts can be viewed, or copy/edited, at ... https://docs.google.com/spreadsheet/ccc?key=0ArD8rjI3DD1WdGhDN3FBWFptTlZTREN0cFkxZ3JHTnc |
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98% of humanity won't have any bitcoins when it enters a bubble and this is a problem, since these are already the laggards, and by buying at the bubble, they make their situation worse, not better. Any thoughts?
Have you seen dukong's bitcoin ranking search? http://btc.ondn.net/searchThe current blockchain holdings by address yield this distribution .... Balance Rank
1 BTC 195,629
10 BTC 91,885
100 BTC 10,128
1,000 BTC 1,127
10,000 BTC 95
100,000 BTC 3
Total 2,062,380
At full adoption, one could reasonably expect the same ratios of large to small holdings, with large growth below 1 BTC. Addressing your point, let's think about when the 98% of humanity acquires bitcoins. I believe it will not be in the next few years when bitcoin reaches full adoption by financial speculators, rather the masses will adopt bitcoin when it is the universal payment mechanism, e.g. everyone has a mobile debit account denominated in bitcoins for everyday point of sale purchases. There is a lesser percentage of humanity that invests in securities and precious metals. Here in the USA, that is about 50%. It is the investor class that will propel bitcoin to the bubble you mention. My logistic bitcoin price analysis suggests that the exponential increase of bitcoin prices will continue for a few more years, therefore in the final exponential year perhaps 10x more new investors will participate - and those are the ones who may be buying near the top. The current fiat-printing stimulation by coordinating central banks could soon be tapered off as the world economy recovers from the Great Recession. Accordingly, I expect world stock markets to return to more typical valuations during the same period that bitcoin reaches full adoption by speculators. Thus at the same time stock markets are slumping, bitcoin will be a contrasting boom. That might be the narrative that lures the last large cohort of bitcoin investors. I am not worried about income and wealth inequality being aggravated by bitcoin adoption. Economic injustice is solvable by the political process in respective jurisdictions. As an aside, achieving the Technological Singularity is my life's mission - I am an active artificial intelligence researcher, and believe that when computers and robots put nearly everyone out of work, the political process will find a fair way to allocate purchasing power to human consumers - in a future economy growing exponentially without the constraints of human labor. |
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Bitcoin is a deflationary store of value. Given that bitcoin has a history of 10x annual growth, there is simply no way a bitcoin-denominated security can provide anywhere the sort of return that pure bitcoin provides. I learned this from experience, having tried ASIC miner stock, Satoshi Dice stock, MPOE bonds and Bitfinex lending to short sellers. The last one provided a small positive return but I withdrew from that site due my perceived hacking risk.
If you buy a mining rig with bitcoin, or buy a bitcoin-denominated security, you have given up any price appreciation on those coins that are no longer yours. My advice, is to simply buy as much bitcoin as you can in the next six months.
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I added a table to the results page of my shared spreadsheet. Given your own guess as to the maximum bitcoin price - by which I mean the price when bitcoin is fully adopted by financial speculators, the corresponding logistic adoption curve predicts these prices ...  You can view, and copy for your own editing, the bitcoin logistic spreadsheet here: https://docs.google.com/spreadsheet/ccc?key=0ArD8rjI3DD1WdGhDN3FBWFptTlZTREN0cFkxZ3JHTncFour sheets are included: commentary, calculations, chart, and results. The calculations are performed using the $1000000 maximum price, but the parameters for the other three cases are in the results sheet. |
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SlipperySlope's graph adds an interesting angle: that we will see mainstream adoption get into full-swing in around 2-4 years. Almost as fun as considering the price growth is considering where Bitcoin will be qualitatively at each order of magnitude.
Mainstream adoption of Bitcoin suggests a radically changed world...in 2-4 years. (Holy shit!)
I believe that bitcoin speculation is way ahead of the underlying bitcoin economy. What will radically change in 2-4 years accordingly, is mainstream perceptions and expectations. Also, I have a question for everyone to consider. Suppose Bitcoin never became popular in China. Suppose all investment and adoption stayed limited to the US, Europe, and wherever else it had significant uptake through 2012. We'd still be using this same exponential chart, correct? The family of logistic curves I made, and the log growth chart presented by rpietila, probably do not change much if we leave off the last six months of data. The addition of China, and later other countries yield a higher maximum bitcoin price, extending the exponential phase of the logistic curve, not necessarily changing its slope. |
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I am in the camp of "print it and forget it" for long term investment. I love paper wallets.
This. Mine is in a safety deposit box, and security-worry free. |
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$1400. And the top will be characterized by doubling from $700 in less than two weeks. Based on comparison with June 2011 and April 2013.
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I believe that the current China-driven rally will surpass $500 before a dampened oscillation correction similar in shape to April 2013.
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1% of all the bitcoins (210,000) would be nice, but I think it is no longer achievable by anyone but the super-rich.
1% of 1% of all the bitcoins (2,100) is a good goal if you are wealthy and can get there quickly before the exchange rate goes up too much.
1% of 1% of 1% of all the bitcoins (21) is achievable by many people now, but maybe not next year.
1% of 1% of 1% of 1% of all the bitcoins (0.21) will be a good goal for someone getting in next year.
This. |
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Nice graphs, thank you. But is there a reason you selected Mt.Gox opening as the starting point and reject the notion that bitcoin was trading OTC for 1.5 years at an essentially flat rate?
The reason is merely the convenience of the data series that I downloaded from bitcoincharts.com. I would guess that changing the starting point would not change the conclusion much - that if indeed bitcoin prices can be modeled according to an innovation adoption logistic function, then the log growth of the past three years may continue for two to four more years before rapidly slowing down. My analysis, if correct, does not say much about what the maximum price might be, but it does say to hurry up and invest now if one's tactic is buy and hold. |
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I have a vacation home high in the Colorado Rocky Mountains. Weed is state-legal there. Over 100 public retailers open January 2014.
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Here is my hand-fit logistic function chart assuming a maximum bitcoin price of $40000. The Y axis is the Log10 of the price. Observe that according to this model the price continues to increase exponentially through 2015.  |
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https://docs.google.com/spreadsheet/ccc?key=0ArD8rjI3DD1WdGhDN3FBWFptTlZTREN0cFkxZ3JHTncThis spreadsheet is my attempt to fit a logistic function to the bitcoin price history and thus predict its future. See Wikipedia http://en.wikipedia.org/wiki/Logistic_functionBecause the initial phase of the logistic curve is exponential, I found that a wide variety of maximum bitcoin prices could reasonably match the price history. What is interesting is that
the resulting family of curves revealed that the very rapid
growth of bitcoin prices will not last beyond a few more
years.I configured the calculations to accept a guess as to what the maximum bitcoin price in $US will be. I tried four values from $40000 to $5000000. For each maximum bitcoin price, I manually adjusted the starting X value and adoption period so that the logistic curve passed through the July 7 2010 price and also passed through the November 11, 2013 price. The resulting adoption periods range from 10.3 years for the $40000 max price to 13.6 years for the $5000000 max price. The logistic function becomes linear at the adoption halfway point and then becomes exponentially decreasing. In the case of a $1000000 bitcoin price, the exponential growth stops in 2017. Note that the logistic function is fit to the price curve and models the behavior of speculators, not the underlying bitcoin economy - which I suppose may take 20-30 years to become fully adopted, e.g. replace precious metals and fiat currencies. Likewise, even after full adoption, bitcoin prices will continue to grow as the underlying bitcoin economy grows. Here is the logistic price curve supposing that bitcoin reaches a maximum price of $1000000. The Y axis is the Log 10 of the price. 
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Would love to be proved wrong but I find it hard to reach $10k next year. I'm pretty convinced we'll see 1k but 10k is just too much (and yeah I know when we were at 1 it seemed impossible to hit 100).
The chart says $1K next year, and $10K in two years. Right? |
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I believe that the adoption of bitcoin as a technological innovation will follow a logistic function. From http://en.wikipedia.org/wiki/Logistic_function ... Historically, when new products are introduced there is an intense amount of research and development which leads to dramatic improvements in quality and reductions in cost. This leads to a period of rapid industry growth. Some of the more famous examples are: railroads, incandescent light bulbs, electrification, the Ford Model T, air travel and computers. Eventually, dramatic improvement and cost reduction opportunities are exhausted, the product or process are in widespread use with few remaining potential new customers, and markets become saturated. Accordingly logistic functions have this relevant property ... The initial stage of growth is approximately exponential; then, as saturation begins, the growth slows, and at maturity, growth stops.  The X-axis is relative time and the Y-axis is percent adoption. We should observe linear bitcoin growth when it reaches 50% of adoption. A further complexity is that bitcoin, once fully adopted, will continue to grow, or shrink as the case may be, with the change in the underlying economy. |
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91 days after the April 10 peak Clearly this bubble collapse is becoming more similar to the 2011 collapse than was the case a month ago. Speculative financial bubble theory says that a collapse takes about the same time as the speculative inflation. Initially, I believed that this bubble started in January, but another interpretation of the price chart allows for the bubble to start last October - a six month inflation. A six month collapse would end in the September - October timeframe. I drew the long term support trendline in green, and added the support line of the June 2011 peak, and drew a black trendline extrapolating the current decline. Evidence and experience drawn from the comparison of this bubble with 2011, and bubble theory makes me believe that the bottom will occur in September or October. The price then should be above $32 and below $50. The lines intersect at approximately $40. Assumptions include the continuation of the two year long term support rate of growth. If the bitcoin economy rate of exponential growth has decreased, the the collapse could well undershoot the target. The previous peak of $32 should provide support according to Elliot Wave Theory. Bubble theory, on the other hand, allows for prices to collapse back to pre-bubble levels, e.g. $10.
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I think that if we stay above $ 74, the next bullish wave will be against the 80 wall.When short-time overbought little drops. Otherwise, we can probably fall back at 60 - 70 again ....  Good call so far. The price has fallen through $75 to rebound off $73. |
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Very insightful illustration of this plunge.
Accordingly, its unlikely the bottom of this plunge will not be gentle and rounded, rather it will be a single day spike down with seller exhaustion followed by a sharp rally.
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Where is the suckers rally this time, it's been like 3 days and we haven't bounced yet.  Each rally has been stopped or beaten back by very large sell orders. You can see the eagerness of the buyers, but large bids near the current price get eaten too. One could expect a stronger rally following a further very sharp spike down, e.g. seller exhaustion. I agree with your sucker's rally characterization. We may be too far along in the bubble collapse for a strong bounce off this plunge. |
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